rising interest rates - Rising prices - inflation

When Are Interest Rates Going Up?

Inflation’s skyrocketing, what are they going to do to stop it?

One of the major things they are doing is to increase interest rates, which really affects you if you are preparing to get a new or refinanced mortgage on a home.

If you’re in the market for a house or refinancing your mortgage, it’s vital for you to understand what’s going on with interest rates and the best path for you to take.

Let’s start with the first key question – 

When Are Interest Rates Going Up?

Simple answer – they already have, and they’re likely to go up more in the next several months.

The average rate for a 30-year fixed-rate mortgage hit 5.25% in mid-May, 2022, the highest rate we have seen in more than a decade.

And the federal reserve, the group tasked with trying to control inflation, has repeatedly told us that they intend to continue increasing interest rates until inflation comes under control.

That probably means that mortgage rates will go even higher in the next several months.

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How High Will Interest Rates Go In 2022?

While we can’t specifically answer that question, there are several “experts” who have weighed in on the subject. As of mid-April, 2022

  • The Mortgage Bankers Association (MBA) predicts that “Mortgage rates are expected to end 2022 at 4.8%–and to decline gradually to 4.6%–by 2024 as spreads narrow.” (Personally, I think this is low, given that average rates are currently 5.25%.)
  • Lawrence Yung, of the National Association of Realtors (NAR) predicts that: “All in all, the 30-year fixed mortgage rate is likely to hit 5.3% to 5.5% by the end of the year. Some consumers may opt for a 5-year ARM (adjustable-rate mortgage) at 4% by the end of the year.”
  • And Mathew Speakman, a senior economist at Zillow says that “Competing dynamics suggest that there will be little reason for mortgage rates to decline anytime soon.”

The real remaining question is how much of the anticipated increase in mortgage interest is already built into the current mortgage rates? The increases have happened already, as the federal reserve increases the interest rate, how much will the mortgage rates still increase?

What is clear is this – interest rates aren’t going down much any time soon, if at all. How much will they increase? They probably will, we just don’t know by how much.

Is This A Good Time To Buy A House?

For some people it is, others may choose to wait this one out.

Multiple factors go into this decision.

  1. The increase in rental prices, caused by a whole bunch of things, including interest rate increases, the trend of turning rental properties into Airbnb properties, and the low inventory in the marketplace, are making finding an affordable rental option incredibly difficult. That alone may force you to buy.
  2. The hotness of the market, where houses are staying on the market for hours instead of weeks has caused house prices to spike in many markets. If higher interest rates cool down the market, it could be a good buying opportunity.
  3. The lack of inventory in the market – between supply chain issues and the weak job market during Covid, construction of new housing dropped significantly. That’s showing up in higher demand (and prices) for existing homes. This should correct itself over the next few years, but it’s literally not going to happen overnight.
  4. Your personal status – if you need someplace different to live, you need someplace to live, and market factors may just be something you will have to deal with. 

How To Save On Your Mortgage 

If you decide now is the time for you to buy, there are still some things you can do to save money on your mortgage despite higher interest rates. We’ve put together a series of articles on specific strategies to reduce your monthly mortgage payments, including:

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Mortgage Savings Strategy – Consider An Adjustable Rate Mortgage

Adjustable-rate mortgages fix your interest rate for a certain period of time, then adjust it to current market rates on a regularly set schedule after that. During times of high-interest rates, they tend to offer significantly lower interest rates than conventional fixed-rate mortgages. Learn more about how to save money using an adjustable-rate mortgage savings strategy here.

Mortgage Savings Strategy – Seller Paid Discount Points

If the market where you are buying has cooled down, negotiating for the seller to pay discount points can be a good strategy. Mortgage discount points are where you (or better yet, the seller) pay extra at closing to reduce your interest rate for the life of your mortgage. Learn more about how how to negotiate for the seller to pay discount points here. 

Mortgage Savings Strategy – Interest-Only Mortgage

Interest-only mortgages are loans where your required payment only includes interest payments, but no principal payment. Then at some point, your mortgage payment goes up as principal payments are added to your required monthly payments. These loans are harder to find and are limited to people in good financial standing, but they could be a way to reduce your monthly payments for a time, hopefully, long enough for interest rates to fall again, so you can refinance at a lower rate. Learn more about interest-only mortgage savings strategies here.

Have Questions About Adjustable Rates Or Other Mortgage Issues?

We can help! You can Ask Your Question here and we will connect you with a Mortgage Expert in your area that can help, or you can find a Mortgage Expert Near You below this article.

About the Author

Scott Schang

A 20+ year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues and making sense of complicated real estate and mortgage topics on this website since 2007

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