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2022 Mortgage Rate Forecast: Housing Authorities Weigh in

Mortgage rate forecasts give an idea of what might be ahead for the year. Here's a preview of how things may shape up in 2022.

May 23, 2022
May 23, 2022
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The year is just a quarter of the way through, and it’s already been an eventful one for mortgage rates. Many are looking ahead to try and predict what mortgage interest rates will average this year.

The question is no longer when mortgage rates will rise -- it's how much they will rise and for how long. The following round-up reveals what leading housing authorities believe 2022 will hold.

What do the 2022 mortgage rate forecasts mean for homebuyers?

We’ve broken down several different forecasts below, but here are the common trends.

The bottom line for prospective homebuyers is this: The record low mortgage rates of 2020 and 2021 are not coming back in 2022. But rates are likely to remain relatively low, historically speaking, and rates in the 5's appear to be the key to cooling the market and steering it toward balance.

In fact, spring housing data suggests the market has peaked and is now turning back in favor of homebuyers.

Trusted industry forecasters are predicting rates to remain between 5% and 6% in 2022. However, it's important to note that mortgage rates react to world events that can't be predicted. Check back often for updated forecasts.

Forecaster 30-yr fixed rate prediction for Q4 2022Fannie Mae5.1%NAR5.3%RealtyTrac5.25%MBA5%Freddie Mac5%Kiplinger6%Average of leading authorities5.275%

National Association of Realtors’ (NAR) forecast

The leading organization for real estate professionals predicts the 30-year fixed-rate mortgage will climb throughout 2022 and average 5.4% by the fourth quarter.

Nadia Evangelou, senior economist and director of forecasting for the NAR, wrote in a report mortgage rates have increased enough to cooled demand and allow inventory to recover during the busy spring season. However, they're still quite low, historically speaking.

"While May and July are generally the two busiest listing months, more homes are expected to be available in the market in upcoming months," Evangelou said. "Thus, these additional homes may help potential buyers to find a home while mortgage rates are still historically low."

RealtyTrac’s forecast

RealtyTrac, a real estate information company and online national marketplace for foreclosed and defaulted properties, expects the 30-year mortgage rate to reach 5.0-5.25% by mid-year and 5.25-05.5% by the end of the year, per Rick Sharga, executive vice president for the company.

"Mortgage rates, which are loosely tied to yields on 10-year U.S. Treasuries, are actually rising faster than those yields as the market anticipates a triple whammy of multiple increases to the Fed Funds Rate, the unwinding of billions of dollars in mortgage securities held by the Federal Reserve, and persistently high inflation for at least the rest of the year," Sharga said. "All of these put upward pressure on mortgage rates, and the combination makes it a near certainty that rates will continue to climb in the coming months."

Fannie Mae’s forecast

Fannie Mae’s most recent housing forecast anticipates that mortgage interest rates to level out in the second half of 2022, average 5.1% in each of the last three quarters.

Senior Vice President and Chief Economist Doug Duncan expects mortgage rates in the 5's to slow housing demand, but largely at the expense of entry-level homebuyers.

“Rising mortgage rates are reducing affordability through higher mortgage-related costs, all while house prices continue to grow," Duncan said. "Historically, rapid and substantial rises in mortgage rates have had the effect of slowing activity, which we reflect in our forecast. Not only is the worsening affordability of homes a problem for potential entry-level homebuyers, but current homeowners are less likely to trade in their existing lower-rate mortgages and list their homes for sale, both of which will likely weigh on sales.”

Related reading: Will Home Prices Drop in 2022? Housing Authorities Share Their Forecasts

"Historically, rapid and substantial rises in mortgage rates have had the effect of slowing activity, which we reflect in our forecast."

 Doug Duncan, Fannie Mae senior vice president and chief economist  

Freddie Mac’s forecast

In its most recent Economic and Housing Market Outlook, Freddie Mac expects the 30-year fixed-rate mortgage averaging 4.6% in 2022, rising as high as 5.0% in the fourth quarter.

Sam Khater, Freddie Mac’s chief economist stated in a recent news release:

“While the sharp increase in mortgage rates will lead to a precipitous drop in refinance originations in 2022, demand for housing continues to remain solid, propelled by the large swath of first-time homebuyers and prospective purchasers looking to lock in a mortgage rate before they increase further.”

Freddie Mac is forecasting 6.7 million purchase transactions in 2022, down from 6.9 million in 2021. However, purchases in 2022 are expected to add up to $2.1 trillion, up from $1.9 trillion last year.

While rates may be on the rise, robust demand from millennials coupled with short supply all but guarantees a humming market throughout the year.

Mortgage Bankers Association’s (MBA) forecast

The highly respected MBA, in its most recent Mortgage Finance Forecast, predicted mortgage rates will average 5.2% in the second quarter of 2022, before falling to an average of 5.0% in the fourth quarter.

In an April 13 mortgage applications survey, Mike Fratantoni, MBA’s Senior Vice President and Chief Economist, said rising rates are a symptom of inflation and rapid job growth.

“Mortgage rates have spiked more than 1.5 percentage points thus far in 2022. This rapid increase in
rates, caused by a much more rapid pace of rate hikes and balance sheet reduction from the Federal
Reserve, is in response to the booming job market and inflation being at a 40-year high," Fratantoni said. "The jump in mortgage rates will slow the housing market and further reduce refinance demand the rest of this year."

"The jump in mortgage rates will slow the housing market and further reduce refinance demand the rest of this year."

Mike Fratantoni, MBA Senior Vice President and Chief Economist

See previous MBA forecasts.

Kiplinger’s forecast

Many turn to Kiplinger for financial advice, including guidance on where mortgage rates will land. Kiplinger economist David Payne foresees the 30-year fixed-rate mortgage averaging 6% by the end of the year.

Payne wrote in a May 12 report that the rise in the 10-year Treasury yield will put further upward pressure on mortgage rates.

"Long-term rates, such as for mortgages, are not directly affected when the Fed raises short rates, but may still rise because of the current inflationary environment," Payne wrote. "Expect the Treasury 10-year yield to peak at 3.5% sometime this year, before dipping back to 3.0% by the end of 2022. The rise in the 10-year rate will also push up mortgage rates, from the current average of 5.4% for 30-year fixed-rate loans, to near 6.0%."

Rates still low through 2022

Due to inflation-combatting measures by the Federal Reserve and the added economic uncertainty stemming from the Russian invasion of Ukraine, mortgage rates were on a steep rise through the first quarter of 2022.

More recent forecasts show them leveling off for the remainder of 2022 -- although it's difficult to predict how stable they will be.

However, it's important to note that periods of sudden rate increases are typically followed by several months or years of slowly falling rates. That's to say, mortgage rates can't and won't be on the rise forever, and they are favorable for homebuyers, historically speaking.

Related reading:

Mortgage rate projections are not a reflection of Fairway’s opinion or guarantee of interest rates in the current or upcoming market.

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