Outlook: What Will Average Mortgage Rates Look Like in 2022?

Key highlights from this report:

  • Analysts expect mortgage rates to be higher in 2022 than they are now.
  • Rates have shown some volatility since hitting a record low back in January.
  • Job gains, economic growth could lead to higher borrowing costs in the future.
  • Home prices, meanwhile, continue to climb at a steady clip in most U.S. cities.

Average mortgage rates in the U.S. have risen quite a bit, since hitting a record low back in January. This has a lot of home buyers and homeowners wondering the same thing: Is now the time to take out a mortgage loan, or should I wait until next year? What will average mortgage rates be like in 2022?

Interest rate forecasts can be challenging in the best of times. When you throw in the uncertainty of a global pandemic, the long-range picture becomes even murkier. Even so, two recent forecasts suggested that we could see higher mortgage rates in 2022 compared to where we are right now.

Analysts from both Freddie Mac and the Mortgage Bankers Association expect that home loan interest rates could creep upward between now and 2022.

Here’s Where We Are Right Now

During the first week of May 2021, the average rate for a 30-year fixed mortgage loan in the US was 2.96%. That’s based on the weekly industry survey conducted by Freddie Mac.

Current mortgage rates are quite a bit higher than where they were at the start of this year. During the first week of January 2021, the 30-year fixed loan average fell to an all-time record low of 2.65%. That was the lowest average in 50 years of record-keeping.

But they’ve bounced around a bit since then, climbing to an average of 3.18% in April of this year. At present, 30-year fixed mortgage loans carry an average rate close to 3%, according to Freddie Mac.

Rate chart through May 2021
Chart: Average 30-year mortgage rates | Source: Freddie Mac PMMS

The chart above shows the average rate for a 30-year fixed mortgage loan (the most popular financing option among home buyers) going back three years. Two things should jump out at you right away:

  • First, you can see how rates declined steadily for most of 2019 and 2020, hitting an all-time low in January of 2021.
  • Secondly, you can see the more recent rise and volatility, on the far-right side of the chart.

Which brings us back to the question at hand. What might average mortgage rates be like in 2022? Should borrowers expect to see higher borrowing costs next year? Several industry watchers believe that will be the case.

What Will Average Mortgage Rates Be in 2022?

In April, two industry watchers published mortgage rate forecasts extending into 2022. And both predicted that we will see higher average rates next year, compared to where we are right now.

Let’s start with Freddie Mac. This is the government-sponsored corporation that buys home loans from lenders, securitizes them, and sells them off to investors. They also conduct a weekly survey of mortgage rates that dates back to the 1970s. Economists and analysts from Freddie Mac recently predicted that mortgage rates would be a bit higher in 2022 than where they are right now.

Here is a quarterly look at Freddie Mac’s long-range forecast for mortgage rates, extending into 2022:

  • Q4, 2021 — 3.4%
  • Q1, 2022 — 3.5%
  • Q2, 2022 — 3.6%
  • Q3, 2022 — 3.7%
  • Q4, 2022 — 3.8%

Also in April, the Mortgage Bankers Association (MBA) published an update to their finance forecast with an outlook stretching into next year. The research team from MBA predicted that rates would rise even higher in 2022, compared to the forecast offered by Freddie Mac above. In fact, MBA’s analysts expect the average rate for a 30-year fixed mortgage loan to rise above 4% next year.

Here is the MBA’s quarterly mortgage rate forecast, issued in April 2021:

  • Q4, 2021 — 3.7%
  • Q1, 2022 — 3.9%
  • Q2, 2022 — 4.1%
  • Q3, 2022 — 4.3%
  • Q4, 2022 — 4.4%

Of course, these are just forecasts. They’re the equivalent of an educated guess. So we shouldn’t get too wrapped up in the exact numbers being projected here. The takeaway is that both groups expect mortgage rates to be higher in 2022 than they are now.

Will Economic Growth Push Rates Higher?

Mortgage rates tend to rise during times of economic growth and improvement. We saw this during the first quarter of 2021. But a recent jobs report brought disappointing results for the U.S. economy.

According to the Labor Department, the U.S. economy gained a meager 266,000 jobs in April 2021. Forecasters and economists were expecting to see much better job growth for that month. Even the weakest forecasts were predicting around 600,000 new jobs in April. Some analysts expected to see a gain of 1 million or more. So the April report was disappointing to say the least.

In response to the jobs report, Treasury Secretary Janet Yellen said:

“You know, we’ve had a very unusual hit to our economy, and the road back is going to be somewhat bumpy … I believe we will reach full employment next year. But today’s numbers also show that we’re not yet finished as our economy continues to heal. It’s important to consider ways in which we can build back better.”

As a result of this lackluster growth, mortgage rates could hover within their current range for the foreseeable future.

But we could see bigger job gains during the third and fourth quarters of this year. The Federal Reserve has repeatedly said it will continue to hold the federal funds rate near zero until the economy improves. While the Fed doesn’t control mortgage rates directly, their policies do have an indirect effect on consumer borrowing costs.

Here’s the relevant part to all of this. If the U.S. economy improves throughout the rest of 2021, it could lead to higher mortgage rates in 2022. At present, many forecasters share that view.

Bottom Line for Home Buyers and Homeowners

No one can predict what mortgage rates will be like in 2022 — at least not with complete accuracy. Industry analysts issue long-range forecasts all the time, but they’re not always accurate.

Even so, it says something when two leading industry groups both expect mortgage rates to rise going into 2022. Given those projections, it probably doesn’t make sense for home buyers and homeowners to expect lower borrowing costs in 2022. The general consensus suggests the opposite, that rates will rise between now and next year.

For home buyers, rising house prices are an even bigger concern. Mortgage rates could be a bit higher in 2022 compared to where they are now. But we will likely see even bigger gains when it comes to home prices. House values nationwide have risen significantly in the past year and they are expected to continue moving north.

Related: What the housing market might do in 2022

So if you’re in the market to buy a home, you might consider doing it sooner rather than later to avoid higher costs down the road.

Disclaimer: This report includes long-range forecasts and predictions offered by third parties not associated with the publisher. The Home Buying Institute makes no claims about future economic or housing trends.