Mortgage rates are now well above their record pandemic lows. Last week, the average 30-year fixed mortgage rate hit 5.11%, the first time it’s been that high since 2010, according to Freddie Mac.
Rates are expected to remain elevated as the Federal Reserve works to tame inflation, which grew at its fastest pace since 1981 in March. If you’re in the market to buy a home, it might be a good idea to lock in a rate sooner rather than later.
“With such fluctuation happening daily, what you will lose usually will be a lot more than what you can gain by not securing your interest rate,” says Ralph DiBugnara, president of Home Qualified and senior vice president of Cardinal Financial.
Will mortgage rates go up in 2022?
To help the US economy during the COVID-19 pandemic, the Federal Reserve aggressively purchased assets, including mortgage-backed securities. This helped keep mortgage rates at historic lows.
Average mortgage rates have ticked up recently, and the Fed’s announcements indicate that mortgage rates will probably continue to increase in 2022. You may want to lock in a rate now instead of risk a higher rate later, but don’t rush to buy a home if you aren’t ready.
What is a fixed-rate mortgage vs. adjustable-rate mortgage?
Historically, adjustable mortgage rates tend to be lower than 30-year fixed rates. When mortgage rates go up, ARMs can start to look like the better deal — but it depends on your situation.
Because adjustable rates start low, they are worthwhile options if you plan on selling your home before the interest rate changes. For instance, if you get a 7/1 ARM and want to move before the seven year fixed-rate period is up, you won’t risk paying a higher rate later.
But if you want to buy a forever home, a fixed rate could still be a better fit, since you won’t chance your rate increasing in a few years.