Mortgage Rates Surged to 3.63% Last Week — the Highest They’ve Been Since April 2020. Here’s What It Means for Borrowers – NextAdvisor

May 2, 2022 By admin

Share
Mortgages
Credit Cards
Loans
Insurance
Banking
Financial Goals
Follow Us
Mortgage Rates Dropped for the First Time In Months. Have They Peaked? Experts Weigh In
Here’s a Perk You Should Look For in a Mortgage Lender, According to Two New Homeowners
Mortgage Rates Rose to 5.28%, the Highest in a Decade. Homebuyers Should Shop Around and Be Patient, Experts Say
The Pandemic Pushed These Families to Make a Cross-Country Move. This Is What They Learned Along the Way
Mortgage Rates Are Rising Faster Than Expected, Reaching Highest Level Since 2011. Experts Say Inflation Is to Blame
Mortgage Rates Are Fast Approaching 5%, But Here’s Why ‘Now Could Still Be a Good Time to Buy a House’
Waiting on the Housing Market to Crash? Don’t, Experts Say. Here’s How Today’s Market Is Different From the Great Recession Housing Bubble
5% Mortgage Rates? This Expert Predicts ‘It Could Happen Within the Month’ and Urges Borrowers to Compare Lenders
Mortgage Rates Keep Rising Faster Than Experts Expected. That Makes It Even More Important for Homebuyers to Shop Around
Experts React to the Fed’s 0.25% Rate Hike: What It Means for Homebuyers and Homeowners
Senior Editor
Katie Collins is a senior editor for NextAdvisor. Her previous experience includes editing and coordinating personal finance…
Staff Writer
Jason Stauffer is a journalist based in Chicago covering personal finance for NextAdvisor. His previous work includes…
Share
The average 30-year fixed mortgage rate jumped up again last week, to 3.63% — the highest it’s been since April 2020.
Last week’s jump — rising by 23 basis points — is the largest weekly increase in nearly 2 years. It’s also the third week in a row that rates increased. The rising rates can be partly attributed to a recent surge in inflation, experts say, which new data shows hit a 40-year high in December.
Despite the potential for surging COVID cases amid the current Omicron wave to put a damper on economic growth, last week’s increase is consistent with recent statements by Federal Reserve Chairman Jerome Powell that the Fed expects to raise rates three times in 2022. As the Fed increases rates with the economy improving, mortgage and refinance rates are sure to follow, experts say. 

The December 2021 consumer price index released by the Bureau of Labor and Statistics (BLS) suggests more rate increases should be expected as long as inflation continues. The 7% inflation in the last 12 months is the largest inflation surge in 40 years, and is cited by experts and the Fed as a major factor behind rising rates.   

Many experts predicted mortgage rates would reach this level in 2022, but they didn’t expect it to happen this quickly. Redfin chief economist Daryl Fairweather recently told us she thought rates would reach 3.6% by the end of 2022. “My expectation for when mortgage rates will increase is spread pretty evenly throughout the year,” said Fairweather. 
Even if rates continue to inch upward, stay the same, or decrease, what’s important for homebuyers and homeowners isn’t where rates are headed, but making sure a refinance or home purchase is the right financial move for their circumstances. 
Here’s a look at what to expect and what this means for borrowers.  
Last week’s average mortgage rate is based on mortgage rate information provided by national lenders to Bankrate.com, which like NextAdvisor is owned by Red Ventures.
Rising rates like we’ve seen the last few weeks are likely to continue, experts say. 
The average 30-year fixed mortgage rate will hit 4% by the end of 2022, says Joel Kan, an economist at the Mortgage Bankers Association’s (MBA). Kan cites expected economic growth in 2022 as one of the biggest reasons behind his prediction.

While some experts have said new economic uncertainty brought on by the Omicron wave could stall rising rates, that hasn’t been the case so far. A new wave of COVID variants threatens economic progress, putting downward pressure on mortgage interest rates, Zillow economist Nicole Bachaud, recently told us.
The economy is better prepared to handle new waves of rising COVID cases than it was during the pandemic’s early days, says Logan Mohtashami, HousingWire data analyst. New COVID variants and surges in cases haven’t had as much of a negative impact on the economy as the initial wave, so even while the pandemic continues, rates will likely continue increasing, he says. 

If you look at the Delta variant, “economic growth continued relatively smoothly,” Realtor.com chief economist Danielle Hale told us recently. New variants will have a smaller impact on actual economic activity, she said. 
The majority of consumers share experts’ sentiment. According to a recent Fannie Mae housing study, 56% of Americans believe mortgage rates will increase over the next 12 months.  
While 3.63% may not look as attractive as the sub-3% rates we saw in early 2021, rates are still very low from a historical perspective — and still at attractive refinancing levels. They remain significantly lower than the nearly 4% levels they were at prior to the pandemic. What matters most is how much you can lower your current rate. If you can lower your current rate by close to 75 basis points, you can stand to benefit from a refinance — translating to significant savings in interest paid over the life of the loan. 
For prospective homebuyers, we believe the housing market is starting to cool down. But demand is expected to stay high, Kan recently told us. “We have a lot of younger people in the population entering, or who are already at, the prime homeownership age,” Kan says. 

Last Week’s Mortgage Rates Compared to Previous Years 

Last Three Years Average 30-Year Fixed Mortgage Rate
January 2020 3.81%
January 2021 2.95%
January 2022 3.63%

.comparison-table tr th:nth-child(0) strong { color: #aee6cc;}.comparison-table tr td:nth-child(0){ background-color: rgba(13, 155, 110, 0.1);}.comparison-table tr:nth-child(0{ background-color: rgba(13, 155, 110, 0.1);}
Mortgage rates bottomed out a year ago when they reached record lows below 3%. That is almost a half of a percent lower than where mortgage rates are today. But two years ago, the average 30-year fixed mortgage rate was at 3.81% — significantly higher than today’s rates.
The big drop in rates in 2021 was largely a result of the economic effects of the COVID-19 pandemic and the Federal Reserve’s reactive policies to support the economy. Nearly 9 million workers reported losing employment in 2020, according to the U.S. Bureau of Labor Statistics (BLS). In an effort to avoid widespread foreclosures, the Federal Reserve implemented policies intended to drive down interest rates to make housing more affordable. Lower interest rates can help keep homebuying affordable and encourage homeowners to refinance to lower monthly mortgage payments.
Last week’s big rate increase was also evident in the latest Freddie Mac survey, a long-running mortgage rate average watched by industry experts. The Freddie Mac survey had the average 30-year mortgage rate average at 3.45% last week, an increase of 23 basis points over its previous week average. This is the largest weekly Freddie Mac increase since March 2020.
Freddie Mac is a government-sponsored organization that purchases home loans on the secondary market. Its survey methodology and the time period in which it collects data each week differs from other surveys, such as the Bankrate survey referenced throughout this article. While different mortgage rate averages will show slight variation, they do show similar overall mortgage rate trends over time.
Existing Homeowners:
New Homebuyers
Stay in the know with our latest home stories, mortgage rates and refinance tips.
In your inbox every Thursday
Thanks for signing up!
We’ll see you in your inbox soon.
I would like to subscribe to the NextAdvisor newsletter. See privacy policy
Facebook
Twitter
Instagram
LinkedIn
YouTube
Learn all about finances in next to no time with our weekly newsletter.
In your inbox every Tuesday
Thanks for signing up!
We’ll see you in your inbox soon.
I would like to subscribe to the NextAdvisor newsletter. See privacy policy
Tell us what you think
Did this article answer your questions?
Time is Up!
Let us know what questions you still have about this topic or any others.
Time is Up!
Thanks for your feedback!
Before you go, sign up for our newsletter to get NextAdvisor in your inbox.
Thanks for signing up!
We’ll see you in your inbox soon.
I would like to subscribe to the NextAdvisor newsletter. See privacy policy
Credit Cards
9 min read
Reviews
6 min read
Mortgage Lender Reviews
6 min read
Cryptocurrency
3 min read
At NextAdvisor we’re firm believers in transparency and editorial independence. Editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by our partners. We do not cover every offer on the market. Editorial content from NextAdvisor is separate from TIME editorial content and is created by a different team of writers and editors.
Subscribe to our newsletter
Thanks for signing up!
We’ll see you in your inbox soon.
I would like to subscribe to the NextAdvisor newsletter. See privacy policy
Follow us
© 2022 NextAdvisor, LLC A Red Ventures Company All Rights Reserved. Use of this site constitutes acceptance of our Terms of Use, Privacy Policy (Your California Privacy Rights) and California Do Not Sell My Personal Information. NextAdvisor may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.

source