30-Year Mortgage Rates Might Reach 5% By End of 2022

According to the latest Freddie Mac data, mortgage rates continue to climb higher. 30-year fixed-rate averages jumped more than a quarter percentage point to 4.42%.

A week, rates were only 4.16% and only 3.17 a year ago. Since the start of the year, mortgage rates have increased by 1.2 percentage points already. Within the year, home buyers might find the rates to exceed 5%.

RELATED: Mortgage Applications Down By 10% As Interest Rates Go Up

Mortgage Rates Now At 4.42%

A point is a fee paid to lenders equal to 1% of the loan amount. This is a separate fee from the interest rate.

According to the latest data released by Freddie Mac last Thursday, the 30-year fixed-rate average jumped more than a quarter percentage point in one week.

It is now 4.42% with an average of 0.8 points. The federal mortgage investor collects rates from nearly a hundred lenders all over the US.

The rates used are for high-quality borrowers with good credit scores and high down payments. As a result, the rates may not be made available for all borrowers. 

Meanwhile, the 15-year fixed-rate average climbed to 3.63% with an average of 0.8 points. Last week, the same was 3.39%.

However, in 2021, the rate average was 2.45%. Meanwhile, the five-year adjustable rate average grew to 3.36% with an average of 0.3 points. Last week, it was only 3.19% while a year ago it was 2.84%.

Mortgage Rates Are Following Treasury Yield’s Upward Trend

According to George Ratiu, Realtor.com economic research manager, the 30-year fixed rate continued to follow the trajectory of the 10-year Treasury yield. 

“Investors reacted to Federal Reserve Chairman Powell’s remarks at the National Association for Business Economics.

The main takeaway is that mortgage rates are likely to push toward 5% before the end of the year,” he said. In addition, lenders are “anecdotally reporting quotes around 4.75% for the 30-year fixed rate.”

With the effects of the pandemic wearing off on mortgage rates, inflation is now the bigger influence. However, inflation brings down the value of future payments for bonds.

Yields go up to entice investors to hold onto bonds despite increased pressure from inflation. Home loan rates follow the same pattern.

This is why when the 10-year Treasury yield hit 2.38% last week, mortgage rates went up as well. Treasury yields are now enjoying their highest level since May 2019. However, rates already went down to 2.32 by Wednesday last week.  

Influence of Inflation

Greg McBride, chief financial analyst at Bankrate.com warns about the influence of inflation. 

“Inflation is still accelerating, he said. Until the time when inflation rates already peaked, “there isn’t much to keep mortgage rates from rising further,” he added. 

The government’s efforts to bring down inflation are also causing mortgage rates to rise. Earlier this month, the Federal Reserve announced its first interest rate adjustment since 2018.

It raised the federal funds rate by a quarter percentage point. While the Fed does not dictate mortgage rates, its actions often cause them to rise or fall.

Robert Heck, vice president of the mortgage at Morty, wrote that other Fed activities can influence home buying rates.

Heck warned that the agency will likely stop actively selling mortgage-backed securities. This is something that many investors suspected the Fed will do based on previous remarks. 

Watch the CNBC Television news video reporting that mortgage rates move higher with 30-year fixed hitting 4.95%:

What do you think will happen to the housing market now that mortgage rates are higher?

Please Select One:

• Homebuilders who invested in increasing their production capacity will find themselves out of customers. Higher mortgage rates might force buyers to hold off from buying homes.
• The supply of houses will soon overtake demand due to higher loan rates.
• I feel bad for homeowners who opted for variable instead of fixed rates.
• Unless the government fixes inflation quickly, we’ll see new leadership in Congress elected later this year.

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What do you think about rising mortgage rates? Will this reverse the trend of the housing market, where last year’s supply couldn’t keep up with demand?

Tell us what you think about higher home loan interest rates. Share your thoughts in the comments section below.