How Do Rising Mortgage Rates Affect My Home Search?

  • Courtney Kohl Paulson
  • 03/30/22

Mortgage rates are rising to curb inflation and most experts expect them to continue rising throughout 2022. 

According to Sam Khater,  Freddie Mac’s Chief Economist, “This week, the 30-year fixed-rate mortgage increased by more than a quarter of a percent as mortgage rates across all loan types continued to move up. Rising inflation, escalating geopolitical uncertainty and the Federal Reserve’s actions are driving rates higher and weakening consumers’ purchasing power. In short, the rise in mortgage rates, combined with continued house price appreciation, is increasing monthly mortgage payments and quickly affecting homebuyers’ ability to keep up with the market.”

However, Keeping Current Matters reports “With both mortgage rates and home values expected to increase throughout the year, it would be better to buy sooner rather than later if you’re able. That’s because it’ll cost you more the longer you wait.”

What is the reasoning behind this? Let’s say you purchase a home valued at $1 million and put down a 20% deposit ($200,000), you would need to take out an  $800,000 loan. With a 4.25% fixed rate over 30 years, you are looking at a $3,935.52 monthly payment (not including taxes, insurance and other fees). 

With experts forecasting an increase in home values of 9% in 2022, that home is on track to be worth $1,090,000 by the same time next year- a $7,500 increase in equity per month.

Paying higher mortgage rates may seem in contrast to what we’ve all become accustomed to over the past 10 years, but it’s time to reexamine the investment strategy. Waiting for lower rates could cost you in the long run.

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