Housing Market in 2022 – Mortgage Interest Rates

Mortgage interest rates and housing market 2022

30-year fixed-rate mortgage  – Buying a house seems to be getting a little more difficult in 2022 as the federal government has raised mortgage interest rates to combat inflation. Since the pandemic started in 2020, the COVID pandemic motivated many people to sell their homes and shop for cheaper options. As bidding wars brewed, interest rates remained low. For most of 2021, home sales rose by 11%. Many Americans were taking advantage of these low mortgage rates, and by the end of 2021, end-of-the-month inventory dipped to a historic low.

2022 Housing Market

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30-year Fixed-rate mortgages 

The federal government raised mortgage interest rates to 3.5% from 3% at the beginning of 2022. Freddie Mac’s average rate has increased since the economic crash in 2008. This caused sales to decrease from 6.15 million to 5.9 million from 2021 to 2022. Supply chain bottlenecks and unemployment contributed to the increase in home prices. Those conditions then caused single-family and multi-family housing to increase. Moreover, mortgage rates have escalated further in the last few months; 30-year fixed mortgages rose from 3.5% to 6% within months. Signaling that buyers have to spend almost ten percent of their budget on average-priced homes. Mortgage interest rates increased 60% higher than last year.

For homebuyers, however, there seems to be an upside. Different Mortage lenders offer a variety of rates and applicants can save anywhere from $1000 to $3000 per year on their fixed mortgage.  Comparing multiple quotes offers the most variety to homebuyers. Simply put:  “Borrowers can benefit from shopping around” –Khater

15-year fixed-rate mortgages and 5/1

The 15-Year fixed-rate loan and the 5/1 adjustable-rate mortgage increased from 4.64% to 5.16%, according to a Freddie Mac survey. Typically, if a homebuyer is offered a higher rate, it is recommended that buyers ask why and compare offers from other lenders. Borrowers who plan on applying for a 30-year fixed-rate mortgage will find rates averaging 6.67%. Borrowers interested in a 5/6 adjustable rate mortgage will see rates of 6.428%. Overall, mortgage rates are at an all-time high comparatively speaking.

Mortgage interest rates September 2022 

The current rate for a 30-year fixed-rate mortgage is 5.89%, with 0.7 points paid – an increase of 0.23 percentage points in a matter of weeks. This week last year, the 30-year rate averaged 2.88%.  The current rate for a 15-year fixed-rate mortgage is 5.16%, with 0.8 points paid, 0.18 percentage points higher week-over-week. The 15-year rate averaged 2.19% a year ago this week.  The current rate on a 5/1 adjustable-rate mortgage is 4.64%, with 0.4 points paid, up by 0.13 percentage points from a week ago. The average rate on a 5/1 ARM was 2.42% this week, a year ago.

Finding the best Fixed-rate mortgages

Homebuyers can experiment with a mortgage calculator to find the best rate. A home affordability calculator can give the homebuyer a maximum loan amount for what they qualify for based on their income, debt-to-income ratio, and mortgage interest rate.

How are mortgage rates impacting home sales?

The significant increase in mortgage rates has negatively impacted home sales. In just the last month, the number of mortgage applications decreased by 0.8% in the last week of September 2022, according to the Mortgage Bankers Association. In the last nine months, there has been a significant decline in applications. The adjusted number of purchase agreements was 3% lower in the last several weeks.  “Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August 2022 data should support housing demand,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “There is no sign of a rebound in applications yet, but the robust job market and an increase in housing inventories should lead to an eventual increase in purchase activity.” Meanwhile, the number of people refinancing their home loans continues to decrease.

Higher mortgage rates and the effect on the housing market in 2022

Since the rise of mortgage rates, the housing market has slowed. For example, June was the busiest month of the year in real estate. However, data show that higher mortgage rates resulted in a historical low for home sales. “Mortgage rates continue to escalate, moving closer to 6%. According to Freddie Mac, the 30-year fixed mortgage rate rose to 5.89%, surpassing its recent high in mid-June. As a result, the monthly mortgage payment is estimated 60% higher compared to last year. While borrowing costs have increased faster than people’s wages, buyers currently need to spend 10% more of their budget for their mortgage payment if they want to buy the median-priced home.” –Nadia Evangelou.

What is a Rate lock?

Purchasing a property in September 2022 can be tricky. Locking in a rate as soon as you receive an accepted offer can ensure you get a competitive rate. A Rate lock means the lender will guarantee your rate for 45-60 days. Locking protects the borrower from rising interest rates before closing on the mortgage.

What are Discount points?

What are discount points on a mortgage? Discount points are a way for borrowers to decrease their mortgage interest rates. When buying points, the homebuyer essentially prepays some of the interest the bank charges on the loan. In exchange for prepaying, the buyer gets a lower interest rate, which can result in lower monthly payments and savings overall on the cost and load over its full term. However, Discount points only pay off if the homebuyer keeps the home long enough. Selling the home or refinancing it will result in no reward from the discount points that the homebuyer purchases. Sometimes, it would be better to put extra cash down on your down payment if a larger down payment could help avoid paying PMI premiums.

What are “Hidden Gems” in the Housing Market?

“Hidden Gems” are houses in cheap or low areas compared to other states or cities. Hidden gems are obscure because few people know these areas. For example, Tucson, Arizona and Dallas, Texas are great examples of hidden gems – the housing in Tucson and Dallas are affordable compared to many other cities.