Expected Fed rate hike pushes mortgage rates higher as inflation surges

Mortgage interest rates are on the rise as inflation pressures the Federal Reserve to increase rates. (iStock)

Mortgage interest rates increased once again as the market prepares for the Federal Reserve to increase rates due to rising inflation, according to new data from Freddie Mac.

The 30-year fixed-rate mortgage grew to 3.56% for the week ending Jan. 20, according to Freddie Mac’s Primary Mortgage Market Survey. This interest rate is up from 3.45% last week and from 2.77% last year. 

“Mortgage rates moved up again as the 10-year U.S. Treasury yield rose and financial markets adjusted to anticipated changes in monetary policy that will combat inflation,” said Freddie Mac Chief Economist Sam Khater.

Mortgage rates are expected to continue rising through the rest of 2022. Both homebuyers and homeowners alike can take advantage of low rates now by taking out a new loan, or refinancing their current loan amount. Visit Credible to find your personalized interest rate without affecting your credit score.

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Housing market remains competitive despite rising rates

Other mortgage types also saw increases in average rates. The 15-year mortgage went up to 2.79% from 2.62% last week and 2.21% last year. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) increased to 2.6%. This is up from 2.57% last week but down compared to 2.8% last year. 

Despite these rising rates, the market remains competitive due to a drop in housing inventory. 

“As a result of higher mortgage rates, purchase demand has modestly waned in advance of the spring home buying season,” Khater said. “However, supply remains near historically tight levels and home prices remain high, keeping the market competitive.”

Homeowners and homebuyers can compare multiple lenders to ensure they get the best interest rate available to them. Visit Credible to compare multiple mortgage lenders at once and find the one that is the best fit for your mortgage loan.

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Mortgage rates could reach 5% in 2022

As mortgage rates rise, one expert says he expects the average 30-year mortgage rate could increase up to 5% this year. 

“This year, consumers should prepare to endure some increases in mortgage rates,” National Association of Realtors (NAR) Chief Economist Lawrence Yun said in the latest Existing Home Sales report. “I also expect home prices to grow more moderately by 3% to 5% in 2022, and then similarly in 2023 as more supply reaches the market.”

If you want to take advantage of interest rates before they rise further, consider refinancing your mortgage to reduce your monthly mortgage payments and save over the life of the loan. Contact Credible to speak to a home loan expert and get all of your questions answered.

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.

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