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What Do Mortgage Rates Look Like After the First Quarter of 2022?
May 4, 2022

What Do Mortgage Rates Look Like After the First Quarter of 2022?

by The CE Shop Team

What is Happening in the Mortgage Industry? 

2021 was a record-breaking year for the mortgage industry. In the past year, we saw the 30-year fixed-mortgage rate hit a record-low of 2.65%, inflation rates hit a 39-year high, and mortgage lenders dished out a record-high of $1.61 trillion in loans. As of 5/4/2022, the interest rate on a 30-year fixed-rate mortgage is 5.3%. 

In the first quarter of 2022 we’ve seen mortgage rates and home prices continue to climb. Let’s take a look at what mortgage rates are expected to do in the upcoming summer season, and if home prices are going to plateau. 

First Quarter 2022 Mortgage Rates 

2021 boasted record-breaking low interest rates, with little variability across the months. To see how mortgage rates fluctuated throughout the year, here’s a look back at rates in the first quarter of 2022

Month 30-Year Fixed-Rate Mortgage
January 3.45%
February 3.76%
March 4.17%
April 4.98%

Let’s put these numbers to work. With today’s interest rate of 5.3%, buying a $500,000 home with a 10% down payment would put the monthly payment around $2,498 (not including taxes, PMI, insurance, or HOA fees). 

So, what should potential buyers expect in terms of 2022’s mortgage rates and monthly payments? 

2022 Mortgage Rate Predictions 

The Mortgage Reports consulted seven housing authorities to hear their predictions for 2022’s mortgage rates. While the industry powerhouses do expect mortgage rates to increase, they don’t anticipate the yearly average to rise dramatically. Here’s a graph representing their predictions: 

2022 Mortgage Rate Predictions

If we look at the higher end of the expert predictions, buying a $500,000 home with a 10% down payment and an interest rate of 4.8%, the monthly payment would be around $2,360 (not including taxes, PMI, insurance, or HOA fees) — only $138 higher than the monthly payment example above. These payments will vary depending on how much money is put down and your client’s lender. 

Still wondering if home prices will plateau or maybe even drop? Freddie Mac says, “The combination of swift home price growth and the fastest mortgage rate increase in over forty years is finally affecting purchase demand. Homebuyers navigating the current environment are coping in a variety of ways, including switching to adjustable-rate mortgages, moving away from expensive coastal cities, and looking to more affordable suburbs. We expect the decline in demand to soften home price growth to a more sustainable pace later this year.” 

The Federal Reserve’s Role in Mortgage Rates 

On 5/4/2022, the Federal Reserve raised mortgage rates by 50 points (half of a percentage) in order to fight inflation. This is the largest jump in mortgage rates we’ve seen since 2000, and is a direct response to the extreme inflation we’ve been seeing. 

It is expected that the Federal Reserve will continue to make these large hikes in mortgage rates in hopes that inflation will start to decline. 

2022 Mortgage Predictions

CNBC explains the idea behind this decision further saying, “The federal funds rate sets how much banks charge each other for short-term lending, but also is tied to a variety of adjustable-rate consumer debt. 

Along with the move higher in rates, the central bank indicated it will begin reducing asset holdings on its $9 trillion balance sheet. The Fed had been buying bonds to keep interest rates low and money flowing through the economy during the pandemic, but the surge in prices has forced a dramatic rethink in monetary policy.” 

If there was to be bad news, it’s that we probably won’t see mortgage rates hit lows as we saw in 2021. The good news is that you shouldn’t expect mortgage rates to increase dramatically throughout the rest of 2022, making for a nice mortgage rate plateau. Although home prices are high, they may start to plateau as mortgage rates increase little-by-little. 

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