My Perfect Mortgage
Federal Reserve Update Navigating Rising Mortgage Rates
2 minute read
December 21, 2021

While experts have been predicting rising mortgage rates into 2022 all year, many believe the Federal Reserve’s recent announcement confirms this expectation.

Fed Chair Jerome Powell announced Dec. 15 that the Fed will continue to reduce the rate of its monthly bond purchases, which signals an end to policies put in place during the pandemic.

Powell attributed these decisions to elevated inflation and a “rapidly strengthening” labor market.

After similar statements in November, the Fed began reducing its purchases by $15 million a month. This number doubled in December, and will be reduced further into 2022.

In late winter or early spring, Fed officials anticipate raising interest rates, with projections showing up to three rate hikes in 2022, two more in 2023, and an additional two in 2024.

While the Federal Reserve’s interest rate moves don’t directly affect mortgage rates, the factors that influence the Fed’s decisions also influence mortgage rates, experts say.

The Fed’s comments on inflation and the general health of the economy are indicators of longer-term rates for mortgages.

The reason interest rates have remained low despite rising inflation is due to the Fed’s actions. 

Inflation is currently at its highest level in 39 years for consumer prices, with wholesale prices rising 9.6 percent in November.

In a statement, the Fed committee said it would continue to monitor the impact of the pandemic and adjust its stance as necessary.

In response to these announcements, mortgage experts remind potential homebuyers not to dwell on the Fed’s actions, but just to use them as an indicator of what may come in the future.

Experts say it’s more important for buyers to focus on personal finances, and making decisions based on their own budgets.

A buyer’s mortgage rate depends on multiple personal factors as well, including credit history, down payment amount, and debts.

Also, experts say it’s always possible to refinance in the future if a buyer doesn’t get the low rate they were hoping for.

Existing homeowners currently have an record average of $178,000 per borrower of tappable home equity, according to Black Knight.

This record equity is a result of high demand for homes during the pandemic, and spiking home prices when supply couldn’t meet demand. 

While experts are confident rates will rise into the new year, they are encouraging borrowers to talk to their loan officers about current purchase and refinance opportunities while rates remain favorable.

Rate predictions are mixed, but experts expect them to hit anywhere from 3.5 percent to 4 percent in 2022.

Photo by Monstera from Pexels

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.