With Mortgage Rates Climbing, Now is the Time to Act

Why Are Mortgage  Rates Climbing?

If you’re thinking about home buying or home selling, Mortgage Rates Climbing Up will affect the housing market in Metro Detroit this year.

Last week, the average 30-year fixed mortgage rate from Freddie Mac jumped from 3.1% on January 1 to 3.45% on January 13. That’s the highest point it’s been in almost two years. On Monday the 18th, after I fell out of my chair when I saw what happened to the mortgage rates, I contacted Maryann at Keller Mortgage; she said, “depending on the time of day and buyers credit score, they were fluctuating between 3.5% and 3.7%” for conventional and 3.25%-3.5% on FHA. YIKES! If you’re thinking about buying a home, this news may have come as a bit of a shock; I know it did for me and the projections were way off. But the truth is, it wasn’t entirely unexpected. Experts predicted rates would rise in 2022, and the forecast is becoming a reality. Here’s a look at the projections from Freddie Mac for this year.

So Why Are the Mortgage Rates Climbing Higher than Projected?

They started to rise after the Fed pulled back purchasing Treasure Notes, which would continue into 2022. Now you need to add the next layer, Inflation. The Fed’s haven’t raised the rates since they cut them at the pandemic’s start. That’s why leading economists strongly suggest the Fed’s don’t wait until March, raise them now, and get control of Inflation. So we will what and see what the Fed’s do when they meet on the 25th – 26th of January. Stay tuned and check back often for updates.

Freddie Mac Expectations for Mortgage Rates Climbing Up

As the numbers show, this jump in rates is in line with the expectations from Freddie Mac. And what they also indicate is that mortgage rates are projected to continue climbing throughout the year. But should you be worried about rising mortgage rates? What does that really mean for you?

• Q1 2022: 3.4%
• Q2 2022: 3.5%
• Q3 2022: 3.6%
• Q4 2022: 3.7%

Home Affordability Could Get More Difficult Over Time

As rates increase modestly, they impact your monthly mortgage payment and overall affordability. If you’re looking to buy a home, rising mortgage rates should incentivize acting sooner rather than later. At the beginning of January, we were at a 3.1% Mortgage Rate. So time is of the essence, seeing we are now pushing close to Mortgage Rates Q4 numbers at 3.7%. The higher rates will affect your purchasing power.

Current Mortgage Rates over the Past 5 Decades

The good news is, even though rates are climbing, they’re still worth taking advantage of. Historical data shows that today’s rate, even at 3.45%, is still well below the average for each of the last five decades (see chart below):

There Is Still Time if You Act Sooner than Later 

If you buy a home while rates are in the mid-3s, your monthly mortgage payment will be locked in at that rate for the life of your loan. As you can see from the chart above, a lot can change in that time frame. That means you still have an excellent opportunity to buy now with a rate that’s better than what your loved ones may have paid in decades past. Buying now is a great way to protect yourself from rising costs and future rate increases while also securing your payment amount for the long term.

Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says:

“Mortgage rates surged in the second week of the new year. The 30-year fixed mortgage rate rose to 3.45% from 3.22% the previous week. If inflation continues to grow at the current pace, rates will move up even faster in the following months.”his year