One of the most unexpected effects of the pandemic has been the incredible rise in property value. Since mid-2020, property prices throughout the US have climbed at record rates. This trend has surprised many economists, especially those who thought that job losses would lead to a lack of demand that would tank the cost of housing.
There are a number of reasons for this, including construction delays leading to a low supply of new homes. However, the factor that has kept demand for property high even as prices climb is record low mortgage rates. In January 2021, mortgage rates were the lowest they had ever been. This was largely due to the Federal Reserve lowering interest rates to stimulate economic recovery.
If you are currently looking to buy a home, you will want to find the best mortgage rates for this month. Rates are still low, although they have gone up over the past few months. But are rates going to stay low, or are you running out of time to get an affordable mortgage?
2022 Mortgage Rates: A Mixed Outlook
At the start of 2022, mortgage rates are already higher than they were for most of 2021. That said, some experts do not expect these rates to rise much higher. The interest rate on a 30-year fixed loan has hovered at over 3.5% in January. The Mortgage Bankers Association (MBA) predicted in October 2021 that this would rise to 4% by the end of 2022. If this is indeed the case, there is no particular rush to secure low mortgage rates.
However, the MBA’s prediction is far from certain and does not exist in isolation. Other experts warn that mortgage rates could rise significantly this year. Inflation has reached 7%, which is the highest it has been since 1982 and significantly higher than expected. This is likely to lead to an interest rate hike by the Federal Reserve. If this happens, applying for a mortgage sooner rather than later may be your best course of action.
But whether or not mortgage rates rise higher than 4% by the end of the year, there are reasons you might want to hold off on getting a mortgage.
Housing prices have been steadily rising for the past year and a half. This has been sustainable because of low interest rates. However, prices are rising beyond what the average American is able to afford, even with low interest rates. It is possible that we will see a decrease in demand, leading to falling property values.
Furthermore, if interest rates do rise, demand could fall even further. Choosing to buy a home now could mean the lowest mortgage rates you will ever get again. But it could also mean that you buy your house for more than it will ever again be worth.
There are no simple answers, as the property market can be unpredictable. Experts are not yet warning people off buying homes, so there is no reason to panic. For now, however, you may be best served by waiting a month or two to see if the tide begins to turn.