What’s going to happen with interest rates in 2022

One of the big questions on the minds of consumers looking to purchase or refinance a home is what’s going to happen with interest rates in 2022. Interest rates, while they remain at historical lows, may experience some movement in 2022. Here’s what you should come to expect if you’re going to be buying a home this upcoming year and how changes in interest rate can affect your borrowing power.

 

Interest rates for the 30-year mortgage presently are in the high twos to threes. Inflation is presently starting to show its ugly head, and it’s beginning to become more of a threat to financial investments. Including mortgage-backed securities which directly influence the direction of mortgage interest rates. As a result, mortgage rates based on these economic factors may be likely going to rise at least throughout the first half of 2022. When the Federal Reserve then starts to hike interest rates to offset inflation, which is poised to happen around the beginning of summer 2022, probably, mortgage interest rates will probably slide back down to the levels they are presently at. Rising interest rates mean the housing market will be a little bit softer. Will still be a tight supply but will otherwise still be soft. What that means is that as many people are going to be looking for houses out of 3.75 interest rate for example on a 30-year fixed as they are today for a 3% 30-year fixed. This is something that you should weigh into your scenario as it relates to buying a home.

If you are thinking about refinancing your home, whether it’s to pull money out for paying off debt, doing home improvement, or getting out of monthly PMI, the time to pull that trigger would be right now as interest rates have not started their estimated upward trend yet.

If you’re pre-approved for say a $600,000 home purchase and you’re target interest rate lets, just say it’s 2.875%. An interest rate such as 3.5% if rates go to 3.5% represents a .625% change and interest rate to you based on what you might get concerning what you have presently. This change in interest rate will change your payment by about $175 a month. $175 a month means that you’ll need an additional $350.00 a month in income to offset that debt. The other way to look at it is $175 a month more mortgage payment, which also means to offset that obligation you could pay off a credit card, a car loan, or an installment loan to free up the $175 a month differential. $175 a month more in payment may influence whether you make an offer on that house or whether you don’t. Though whether you get pre-approved to purchase a house now, or in the later part of 2022, you should have at least a $200 monthly payment buffer anyway for a variety of reasons. The $200 monthly payment buffer specifically gives you more flexibility as it relates to your house payment, it also casts a wider net of opportunities. This means that if you can say “ok, I’m good with XYZ payment but I’m also OK if that payment is $175 a month more” that’s the right expectation, you should go in purchasing a house. $175 to $200 a month of payment can be upwards of $30,000-$40,000 of spending power on a house. That means the difference between a $600,000 house and a $635,000 house for example. This is something you should weigh into your financial mix as you decide whether you should take out financing or not.

So how do you know whether now is a good time to make an offer on a house and close on it or whether now is a good time to refinance your house? Quite honestly, only a local loan officer understands the market and understands the dynamic of the trading of mortgage-backed securities. A loan officer that can best advise you about the optimal time to secure a payment, that’s woven into your budget, is probably the most pragmatic thing you can do to benefit your bottom line. At the end of the day, it is important to recognize that interest rates in 2022 more than likely are going to rise. Probably an 80% chance they’re going to rise and the fed’s actions to combat rising inflation almost certainly will result in lower rates again at the end of 2022.

If you’re looking to purchase or refinance a house start with a no-cost loan quote today!

RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

The Risks of Chasing a Lower Mortgage Rate

Why Chasing a Lower Mortgage Rate Can Backfire When buying a home, it’s natural to…

A woman sitting at a kitchen table looking through documents with an American flag and framed military photo beside her, symbolizing a surviving spouse exploring VA loan options.

VA Loan Options for Surviving Spouses

Understanding VA Loan Refinance Options for Surviving Spouses Losing a spouse is one of life’s…

California homes near wildfire zones highlighting insurance challenges due to climate change.

Why Home Insurance Is Skyrocketing in California—and What Buyers Should Know

​Climate Change and Mortgage Challenges: Navigating Homeownership in California In recent years, climate change has…

View More from The Mortgage Files:

begin your mortgage journey with sonoma county mortgages

Let us make your mortgage experience easy. Trust our expertise to get you your best mortgage rate. Click below to start turning your home dreams into reality today!