Even experts have trouble accurately predicting mortgage rates, but given Fed moves, one suggests only a slight increase – about 3.5% overall in 2022.

NEW YORK – Mortgage rates play a big role in borrowers’ buying power – and super-low rates over the past year allowed many homebuyers to stretch their housing budgets, an important tool as they faced high home price increases.

But many economists predict higher rates over the next few months. What can homebuyers expect for 2022?

While the trajectory of rates is never simple to predict, particularly due to the ongoing pandemic, Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors® (NAR), told Yahoo that she believes mortgage rates are poised to rise slowly in 2022.

“Inflation rose to its highest level since 1990,” Evangelou told Yahoo. “When inflation rises, lenders ask for higher interest rates as compensation for the decrease in purchasing power. Thus, if inflation remains elevated for a longer period, that will drift up mortgage rates.”

She also expects the Fed to raise interest rates in the first half of 2022 to try to manage inflation, and another Fed change – the tapering of its monthly bond purchases – should also push mortgage rates higher. Mortgage rates often follow the 10-year Treasury yield and, with those expected to rise, mortgage rates will likely follow.

Evangelou expects the 30-year fixed-rate mortgage to average 3.3% in the first quarter of 2022, rising to 3.5% for the year.

For comparison, the 30-year fixed-rate mortgage averaged 3.11% for the week ending Dec. 2, Freddie Mac reports. Mortgage rates the last few weeks have been moving higher from their sub-3% lows earlier in the year.

Evangelou says that despite the jump in 2022, rates will still not be high: “Consumers shouldn’t panic,” she says. “Even with this increase, mortgage rate (increases) will be slow.”

Source: “Mortgage Rate Forecast for 2022,” Yahoo! (Dec. 7, 2021)

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