Mortgage rate forecasts for March 2022: upward pressure continues

Most signs point to higher mortgage rates in the days and weeks ahead. Markets are volatile due to many factors, including geopolitical disputes and lingering inflationary concerns.

Meanwhile, house prices are not falling. So if you’re wondering whether to lock in a rate now or later, your window of time can shrink to capitalize on current rates before they spike.

Read on for key rate predictions from trusted industry experts.

Mars brings uncertainty

Ask the pros and most will agree: mortgage rates should go up in March.

“I expect the 30-year fixed mortgage rate to hover around 3.9% next month, with the 15-year fixed rate between 2.9% and 3.0%,” says Nadia Evangelou, director of forecasts for the National Association of Realtors. “Rapidly rising inflation and expectations that the Fed will raise short-term interest rates as early as this month will continue to drive mortgage rates higher. March is also the month when the mortgage buying program Fed assets must come to an end. This means that the current economic stimulus policies will come to an end very soon.

Greg McBride, Bankrate’s chief financial analyst, predicts even more expensive rates.

“With inflation numbers continuing to surprise on the upside, mortgage rates will remain above 4.0% on the 30-year fixed rate and above 3.25% on the 15-year fixed mortgage rate in March. wildcard is the extent to which news like Russia’s invasion of Ukraine takes center stage, as the impact on mortgage rates could go either way,” he says.

The world is focused on Eastern Europe and the images of bombs, tanks and troops. Sanctions against Russia could give direction to rates in the coming weeks.

“The tensions between Russia and Ukraine could affect global markets. This could cause mortgage rates to fall as more investors shift from equities to the safety of bonds,” adds Evangelou. “However, the Fed will likely raise short-term interest rates as early as this month, pushing up mortgage rates.”

An even bigger catalyst for rates than the Ukraine dispute could be the lingering specter of inflation.

“Inflation has been a bit higher than expected in recent months. If inflation surprises on the upside, interest rates are likely to be higher than expected,” says Len Kiefer, deputy chief economist at Freddie Mac. “On the other hand, negative economic effects can put significant downward pressure on mortgage rates. We also need to see how lenders react to rising interest rates – to keep business going, some lenders may choose to squeeze spreads.This would mean that primary mortgage market rates might not fall as much as secondary rates or Treasury yields.

Watch Mortgage Rates Beyond March

Don’t count on the fact that rates will improve after the spring and we will be heading into the second half of 2022, unfortunately.

Concrete examples : Fannie Mae now expects the benchmark 30-year fixed rate mortgage to average 3.5% and 3.6%, respectively, in the first quarter and through the rest of 2022. That compares to 3 .3% and 4%, respectively, as expected by the Mortgage Bankers Association. Meanwhile, in his latest predictions, Freddie Mac was looking at a 30-year average fixed rate of 3.6% for the year.

“While higher short-term interest rates will push mortgage rates up, I expect some of that impact to be eventually mitigated by lower inflation,” Evangelou said. “Thus, I expect the 30-year fixed mortgage rate to continue to rise, although we probably won’t see the big jumps that have happened over the past few weeks.”

Kiefer agrees.

“Mortgage rates are expected to continue to rise throughout 2022, although the pace of rate increases is likely to moderate,” he notes. “Much of the rate hike at the start of 2022 is in anticipation of what happens later this year, especially with the Federal Reserve’s interest rate policy.”

Rates could stabilize if the Fed takes aggressive action against inflation over the next few months by repeatedly raising interest rates and providing details on the liquidation of balance sheets, McBride believes.

“But if inflation continues to pick up and the Fed stays behind the inflation curve, then 30-year fixed rates could hit 4.5% or more in a relatively short time,” McBride said. “How the Fed deals with inflation and whether the supply chain shows sustained improvement will dictate whether or not inflation starts to ease, as is widely expected this year. Wildcards such as geopolitical issues or another variant of coronavirus could also change things, but only for a limited time.

Seize the moment if you can swing it

The takeaways here are clear: provided your financial situation is in order and your job stability is relatively certain, there is no better time than the present to lock in a mortgage before rates rise. and reduce your purchasing power.

“There’s little point in waiting for lower rates when all the risk is biased towards higher rates,” McBride says. “But don’t rush into buying a home just to get a low rate if you aren’t sufficiently prepared or financially able to handle the responsibilities.”

Count Kiefer among believers of this creed.

“With rates on the rise and expected to rise through 2023, it makes sense to get a mortgage purchase or refinance if you’re in good standing,” he says.

Also consider that current mortgage rates are still not far from historic lows.

“Even with the recent increase in mortgage rates, buying a home is still an excellent investment. Along with the other benefits of home ownership, the equity you can build in 2022 due to price appreciation will likely be higher than your mortgage payment,” says Evangelou. “If you buy a house today worth $350,000, the principal and interest on your mortgage payment should be about $1,485 per month. Still, assuming house prices rise 6% in 2022 as projected, you can accumulate about $1,750, on average, each month in equity due to price appreciation.

Just be careful not to overstretch your finances or bite off more than you can financially chew.

“There is more risk lately with prices as high as they are. When in doubt, remember that the novelty of that new home will fade, but not the mortgage payments,” warns McBride. Finally, especially with rising rates, remember that shopping around between different lenders and different mortgage products is extremely important.

“It can save you thousands of dollars if you can find a lender that offers a lower rate and more competitive fees,” adds McBride.

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