Why are current mortgage rates so high?

November 6, 2022/Scott Sheldon

People who are thinking about getting a mortgage to buy or refinance a home are having shell shock relating to the costs associated with doing a mortgage transaction. It’s not as simple as inflation to why mortgage rates are so high. Here’s some information that explains not only why mortgage rates are so high, but the opportunities in today’s present market and what the future holds…

The key reason 30-year mortgages are at 7% is there’s a shortage of buyers. The more buyers of mortgage back securities the lower mortgage rates become. The shortage of mortgage-back securities came from the Fed backing out of buying  mortgage backed bonds. Along with other mortgage back securities’ buyers backing out because of pre-payment risk. Compounding the problem is the Bank of England, the UK economic threat, the fall of the Japanese yen, and the risks of a nuclear conflict between Russia and Ukraine. These concerns are causing the market to dump US currencies including treasuries and mortgage-back securities to raise cash for these nations. This only adds to the supply and demand imbalance. The reason this is problematic is it creates an economic market atmosphere that these mortgages being originated today long term will be refinanced. This phenomenon that’s taking place has produced an inverted yield curve which is an indicator that in the long-term rates will come down. Put anthoer way, the prepayments on these mortgages being originated today will come to fruition.

Its estimated interest rates could be in the low fives at the end of the fourth quarter of 2023. This would then produce a mini refinance boom of all the mortgages being originated today. The investors on Wall Street know this, and that’s why the mortgages today have discount points associated with most interest rates as the pre-payment risk is a very real concern. This means the loan not coming to maturity. The loan is quickly paid off creating investment risk for the end mortgage buyer.

What does that mean to you as a consumer? It means buying a home today and negotiating the home substantially. That is the opportunity this market brings. Know this- when rates do ultimately fall, competition will re-emerge and the bidding wars will return driving the demand for real estate.

If you’re thinking about purchasing a home or want to learn more about what it might take to get prequalified to purchase a home start with a no-cost loan quote today!

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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.

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