The current mortgage market
If you want to buy or refinance a home in 2022, the first question you should ask is, “What will mortgage rates be?”
What may look like small rate changes on paper often translate to losses of thousands of dollars in the long run. A rate increase of just 0.25% means you’ll pay $10,000 more in total interest for a $200,000 30-year fixed loan.
At the beginning of January 2022, the average 30-year mortgage rate sat at 2.93%. By the end of January 2022, interest rates had risen to around 3.71%. Many experts predict interest rates will rise to 4% by the end of the year.
What is causing rate increases?
Experts attribute rising mortgage rates to two interconnected factors: inflation and the Federal Reserve’s changing financial policies.
In December 2021, inflation spiked to 7%, the highest rate in 40 years. That’s up from 1.4% annual inflation in 2020, and well above the Federal Reserve’s goal of keeping inflation below 2%.
In response to rising inflation, Federal Reserve Chairman Jerome Powell hinted the Fed will start raising its main interest rate in March. The Fed has also started to curb its quantitative easing policies.
The result? Rising mortgage interest rates.
What higher rates mean for homebuyers and homeowners
Though mortgage rates are rising, they remain historically low. 20 years ago, the average 30-year fixed mortgage rate was 7.0%, nearly twice the current rate.
Rates may fluctuate, but they are unlikely to trend downward anytime soon. Current mortgage interest rates represent an opportunity for those looking to buy a home. Some homeowners may also benefit from refinancing their mortgage.
If you’re interested in securing a low-interest mortgage or refinancing your current mortgage, contact United Credit Union today.
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