Four Mortgage Rate Predictions for 2022 Suggest Higher Borrowing Costs

  • New mortgage rate predictions for 2022 predict higher borrowing costs ahead.
  • Freddie Mac, the MBA, and two economists predicted a gradual increase.
  • Some forecasts suggest 30-year loan rates could rise above 4% in 2022.
  • They’re currently hovering around 2.8%, according to Freddie Mac’s survey.
  • An increase in borrowing costs could further cool the U.S. housing market.

Thirty-year mortgage rates in the U.S. continue to bounce around below the 3% threshold, on average. But a recent batch of mortgage rate predictions for 2022 suggest that we could see higher borrowing costs next year, compared to where we are right now.

These forecasts were issued in July by Freddie Mac, the Mortgage Bankers Association, along with a pair of economists. While their specific predictions vary, all of these groups and individuals expect mortgage rates to be higher in 2022 than they are right now.

A Fresh Round of Mortgage Rate Predictions for 2022

We start by examining a recent mortgage rate prediction for 2022 issued by Freddie Mac. This is the government-sponsored corporation that purchases home loans from lenders and sells them to investors via the secondary market. Their economic research team also publishes a quarterly forecast for the housing market and mortgage industry.

Their latest quarterly forecast, issued in mid-July, offers some mortgage rate predictions for 2022. Researchers from Freddie Mac expect the average rate for a 30-year fixed home loan to reach 3.4% by the fourth quarter of this year. Looking further out, they expect that average to reach 3.8% by the end of 2022.

Rates over 5 years
Chart: 30-year mortgage rates over the past five years | Source: Freddie Mac PMMS

On July 21, the Mortgage Bankers Association (MBA) issued a similar set of mortgage rate predictions stretching into 2022. The MBA is an industry group that represents lenders across the United States. As with Freddie Mac, they also have a team of economists and analysts who monitor trends within the housing industry.

In their July 2021 forecast, the MBA predicted that 30-year mortgage rates would average around 3.4% by the end of this year. But they offered a slightly bolder prediction for 2022, compared to the Freddie Mac outlook above. The MBA’s research team expects the average interest rate for a 30-year fixed mortgage loan to climb above 4% in 2022, perhaps landing at 4.3% by the end of next year.

Other Mortgage Rate Forecasts in the News

In addition to these industry groups and corporations, individual economists are also making mortgage rate predictions for 2022. And most of them echo the forecasts presented above, with a prediction for higher borrowing costs next year.

Charles Dougherty, an economist from Wells Fargo Securities, recently predicted that mortgage rates could climb to around 3.5% by the end of this year. Beyond that, he expects rates to reach an average of around 3.9% by the end of 2022.

This outlook closely resembles Freddie Mac’s mortgage rate predictions for 2022. So there appears to be a general consensus forming here, in the sense that rates will gradually rise through the end of this year and into 2022.

Raymond Sfeir, Director of the Anderson Center for Economic Research at Chapman University, made a nearly identical mortgage forecast for 2022. In July, he predicted that 30-year home loan rates would land at 3.4% by the end of this year and reach 4% by the second half of 2022.

A General Consensus Forming

These are just a few of the mortgage rate predictions for 2022 that predict higher home loan costs next year. Of course, we have to bear in mind these are just forecasts. They’re essentially an educated guess based on current conditions within the mortgage and housing market. In other word, they are far from certain.

Still, it’s noteworthy when a number of economists and research groups all start making the same predictions for mortgage rates.

For 2022, most of them appear to be predicting higher borrowing costs compared to where we are now. The only difference is how much they expect mortgage rates to climb between now and the end of 2022. Aside from those variations, they all seem to be saying the same thing.

Will It Cool the Housing Market Down?

In a recent report, we explained that the U.S. real estate market appears to be slowing down after a year-long period of overheated activity. The evidence includes a recent and significant drop in home sales, among other factors.

If these mortgage rate predictions for 2022 turn out to be accurate, they could add to this general cooling effect. The housing market tends to accelerate when mortgage rates are at their lowest, and slow down when borrowing costs start to rise. It’s a pattern we’ve seen many times in the past.

But all of that remains to be seen. As of late July 2021, the average rate for a 30-year fixed mortgage loan was hovering at a historically low 2.8%. So there’s still a lot of incentive for home buyers. This is partly what led to the surge in home-buying demand over the past year or so.

Of course, we don’t know how long these low rates will last. As you can see from the 2022 mortgage rate predictions gathered above, a lot of industry watchers expect them to start rising later this year and into 2022. If that happens, it would likely cool the U.S. housing market even more.

Disclaimer: This article includes mortgage rate forecasts and predictions for 2022 issued by third parties not associated with the publisher. Such projections are the equivalent of an educated guess. The Home Buying Institute makes no claims about future rate trends or housing-related conditions.