Mortgage rates are on the rise in 2022 after hitting record lows during the pandemic. As the Federal Reserve raises interest rates to fight inflation, mortgage rates are expected to continue climbing throughout the year. This makes it more important than ever for homebuyers to shop around and find the best possible rate.
This comprehensive guide examines the factors impacting mortgage rates in 2022 and provides tips on how to find and compare the top lenders in your area to secure the lowest rate.
Key Factors Influencing Mortgage Rates in 2022
Mortgage rates are primarily driven by the 10-year Treasury yield and actions by the Federal Reserve. Here are the key factors putting upward pressure on rates this year:
Federal Reserve Rate Hikes
- The Fed has signaled it will aggressively raise its federal funds rate in 2022 to combat high inflation. This is expected to push up all borrowing costs.
- Most experts predict the Fed will raise rates 4-7 times in 2022, bringing the federal funds rate to around 1.75-2.75% by year-end.
- Each Fed rate hike typically triggers a corresponding increase in mortgage rates.
- Inflation hit a 40-year high of 8.6% in May 2022. High inflation drives up the 10-year Treasury yield, which directly influences mortgage rates.
- As long as inflation remains elevated, upward pressure on rates will persist. Moderating inflation could provide some relief.
Strong Economic Growth
- Robust job growth and consumer spending indicate a healthy economy. This encourages the Fed to tighten policy with higher rates to prevent overheating.
- Economic strength typically signals higher mortgage rates ahead. A potential slowdown could ease rate hike pressure.
- Major events like the Russia-Ukraine conflict or Covid resurgences worldwide can cause volatility in global financial markets. This instability often leads investors to buy up Treasuries, pushing yields down and relieving upward rate pressure.
Current Mortgage Rate Trends and Forecast for 2022
Based on the above factors, here is an overview of mortgage rate trends along with projections for the remainder of 2022:
| Month | 30-Year Fixed Average | Direction |
| January 2022 | 3.22% | ↑ |
| February 2022 | 3.76% | ↑ |
| March 2022 | 4.17% | ↑ |
| April 2022 | 5.11% | ↑ |
| May 2022 | 5.25% | ↑ |
| June 2022 | 5.70% | ↑ |
| July 2022 | 5.54% | ↓ |
| August 2022 | 5.55% | ↑ |
| September 2022 | 6.29% | ↑ |
| October 2022 | 6.92% | ↑ |
| Forecast: | | |
| November 2022 | 7.00-7.25% | ↑ |
| December 2022 | 7.25-7.50% | ↑ |
| Q1 2023 | 7.00-7.50% | ↓ |
| Q2 2023 | 6.75-7.25% | ↓ |
| Q3 2023 | 6.50-7.00% | ↓ |
| Q4 2023 | 6.25-6.75% | ↓ |
- Average 30-year fixed rates surged from 3.22% in January 2022 to around 7% in October 2022.
- Rates are projected to peak around 7.25-7.50% by end of 2022 before slowly declining through 2023.
- Timing your purchase to align with downward rate cycle trends can save significantly on lifetime loan costs.
Fluctuations in inflation, employment reports, and other key economic data will impact the precise rate moves week to week. But the overall trajectory for 2022 is clearly upwards. Being ready to act when rates start favorably trending down again will be key.
10 Tips for Finding the Best Mortgage Rate in 2022
While rates are rising overall, there are still ways savvy buyers can find lower rates and save money:
1. Shop Around Extensively
- Rates vary significantly by lender. Checking rates from multiple lenders ensures you find the best deal.
- Online lenders, credit unions, and smaller banks are often cheaper than big banks.
2. Check Rates Daily
- Rates change daily based on market conditions. Checking rates from multiple lenders daily helps you jump on good deals.
3. Ask About Discounts
- Many lenders offer discount rates for things like setting up autopay, having deposits/assets with the lender, or buying down the rate with points.
4. Improve Your Credit
- Good credit scores get better rates. Review your reports, dispute errors, and pay down balances to boost your score.
5. Lower Your Debt-to-Income Ratio
- Lenders look at your total monthly debt payments vs income. Reduce debt or look for ways to increase your qualifying income.
6. Make a Bigger Down Payment
- 20% down or more gives access to the best rates. Save aggressively for your down payment if possible.
7. Adjust Your Home Purchase Budget
- Putting less toward a home purchase makes your monthly mortgage payment smaller, which can help improve DTI.
8. Change Term Length
- Shorter terms (15 or 20 years) have lower rates than 30 years. You pay more monthly but build equity faster.
9. Buy Discount Points
- Paying points upfront reduces your rate over the life of the loan. Calculate if break even period works for you.
10. Lock Your Rate
- Lock in your rate as soon as you find a good deal. This protects you if rates rise suddenly before close.
Taking these steps improves your odds of finding the lowest rate and best lender match for your situation.
5 Best Mortgage Lenders of 2022
To find the best mortgage lender, you need to look at more than just today’s rate quotes. Service, fees, types of loans offered, and overall customer satisfaction should factor in as well.
Here are 5 lenders that stand out based on total value and service:
1. Quicken Loans
- Rates: Consistently competitive rates
- Service: Responsive service, tech-focused online tools
- Loan Types: Conventional, FHA, VA, Jumbo
- Unique Perk: Rate Shield locks your rate for 90 days while shopping
- Why Choose? Top-rated service technology makes the process very efficient
- Rates: Very competitive rates with deep discounts
- Service: Digital-first customer experience with quick approvals
- Loan Types: Conventional, FHA, VA, USDA, Jumbo
- Unique Perk: Mello SmartLoan gives rate discounts for purchasing services
- Why Choose? One of the largest lenders with some of the lowest rates
3. Navy Federal Credit Union
- Rates: Great rates for members; membership open to military/families
- Service: Member-focused service with knowledgeable loan officers
- Loan Types: Conventional, VA, FHA, USDA
- Unique Perk: Members have access to the full suite of Navy Fed products
- Why Choose? Can’t beat service and rates if you qualify for membership
4. Fairway Independent Mortgage
- Rates: Competitive rates with personalized service
- Service: Local mortgage brokers provide tailored guidance
- Loan Types: Conventional, FHA, VA, USDA, Jumbo, Reverse Mortgages
- Unique Perk: Options for down payment assistance programs
- Why Choose? Local experts help navigate all options to find your best match
5. Guild Mortgage
- Rates: Consistently competitive rates across all loan products
- Service: Personalized service from local mortgage bankers
- Loan Types: Conventional, FHA, VA, USDA, Jumbo, Reverse Mortgages
- Unique Perk: Several down payment assistance programs available
- Why Choose? Local experience combined with innovative mortgage technology
This selection gives you a mix of fintech lenders with easy online processes as well as mortgage brokers who can provide guidance on specialized loan programs. Finding the right lender match for your needs will help ensure the mortgage process goes smoothly.
Frequently Asked Questions on Finding the Best Mortgage Lender
Still have questions about what to look for in a lender and locking in the best rate? Here are answers to some commonly asked questions:
1. How Many Lenders Should I Get Rate Quotes From?
At least 3-5 lenders should be checked to give you an accurate picture of competitive market rates. Be sure to get quotes from a mix of mortgage brokers, credit unions, and fintech online lenders. The wider the net, the better chance of finding the lowest rate.
2. Should I Work With a Mortgage Broker or Apply Directly With Lenders?
Mortgage brokers have access to wholesale lender rates you can’t get directly. They also manage the application process for you. Direct lenders are easier to compare. Try both options to see if the broker rates beat the retail lender rates.
3. How Much Can Discounts Like Buying Points Lower My Rate?
Buying points can lower rates around 0.25% per point purchased. Break even analysis is key – don’t buy points unless you know you’ll stay in the home long enough for savings to exceed upfront costs.
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4. Does Getting Pre-approved Impact My Credit if I Don’t End Up Buying?
Pre-approvals require a soft credit pull which has no impact on your score. But make sure to only go through full approval once you have an accepted offer to avoid multiple hard pulls lowering your score.
5. When Is the Best Time to Lock In a Rate?
Lock as soon as you realistically think you’ll close within the lock period (typically 45-60 days). Lock too early and you risk rates dropping more. Too late and rates could rise, costing more at close.
6. How Much Do Closing Costs Vary Between Lenders?
Closing costs can vary widely, so compare detailed cost estimates line by line. Look for lenders offering no origination fee, free appraisal, or closing credits to lower total costs.
Shopping thoroughly and asking the right questions will lead to finding both the lowest mortgage rate and best value lender for your specific home purchase scenario.
The Bottom Line
Mortgage rates are headed upwards in 2022 as part of broader rising inflation and interest rates. But shopping diligently amongst multiple lenders can help you lock in competitive fixed rates before they climb higher.
Casting a wide net and checking rates daily as you get closer to a purchase gives you the best chance of saving on interest over the life of your home loan. If buying in 2022, be ready to act quickly when you see rates trending favorably to get the lowest rate and start saving.