Rising Rates: What Does This Mean For You? - Future Home Loans
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Rising Rates: What Does This Mean For You?

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The rollercoaster of rates over the course of the last 2 years has been nothing short of eye catching. In 2020, mortgage rates were dropped in response to COVID-19 by the Federal Reserve. Since this time, rates have slightly edged up, but are still near historic lows. It has greatly benefited first time homebuyers and well-versed home owners alike in more ways than one: but has the onset of rising rates brought this joy ride to an end, and what is the light at the end of the tunnel looking like? 

The move made by the Federal Reserve in 2020 to drop rates was made to support borrowing on home loans (along with other loans) – this led to an uptick in demand for mortgage applications and loans. By December of 2020, Freddie Mac was reporting average mortgage rates hitting the mid-2’s. As demand continued to expand into 2021, we saw record low averages in the 2%’s in January of 2021. 

Mortgage experts expect rates to continue to climb from the all-time low achieved in January of 2021, but to what extent? As we continue to watch inflation climb, we can anticipate the Federal Reserve to raise rates in a move to rein in growing inflation; high inflation reduces buying power of currency. Along with national inflation, other factors that impact rates include economic health, supply and demand, and the federal reserve monetary policy. While all numbers are strictly estimates, mortgage experts at this time anticipate rates ranging from 3% to 4% by the end of 2022

Keep in mind that these estimates are still noticeably historic lows. In years past, in 2019 for example, 3.6% was seen as the record low average for the year. This means it is still a great time to buy or refinance! If you are planning to buy or refinance in 2022, you are most likely watching the market closely. With home prices still rising, it makes sense to lock in the current rates and current home prices if you can afford to do so. As rates rise, and home prices increase, a few months of waiting to see if the market drops could mean hundreds of extra dollars in interest per month.

The Bottom Line

There’s a lot of numbers in the news these days. Some are rising, some are falling, and some are unpredictably bouncing back and forth in between. Lucky for us, rates aren’t doing anything drastic, but the needle is moving.

Rates are slightly rising, and here’s a few things to keep in mind:

1. First it’s important to acknowledge that rates have been historically low so no need to panic. Rates might rise a smidge, but will still be considered very low.

2. It’s predicted that home prices will continue to rise, but higher interest rates could help slow that rise pace compared to the pace home prices rose in 2021.

3. If you’re in the business, sales may shift from refinances to new home buys or from refinances to cash-out refis. 

Hire A Pro

Finding the right financial move can be stressful – here at Future Home Loans, we are mortgage brokers. A broker acts as an intermediary, helping you identify the best lender for your situation and puts together all the information needed for the mortgage application. The benefit of using a broker is that we do the “shopping” for you.  We shop multiple lenders to find the lowest rates and costs (More lenders = more competition = lower rates.). We have relationships with several lenders who offer a wide variety of programs with minimal or no overlays (tighter lender-specific requirements). What are you waiting for? Contact us today; our experts are waiting for you.

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