5% Mortgage Rates? This Expert Predicts ‘It Could Happen Within the Month’ and Urges Borrowers to Compare Lenders

A photo to accompany a story about the latest mortgage rates Justin Sullivan/Getty Images
A for sale sign posted in front of a home for sale on March 18, 2022 in San Rafael, California. Rising mortgage rates combined with rising home prices continue to eat into homebuyer affordability. Some experts think rates could reach 5% soon.
We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.
  • The average 30-year fixed mortgage rate was 4.73% last week, up 14 basis points as rates continue to climb toward 5%.
  • Inflation and expectations of more action by the Federal Reserve to reduce that inflation are major drivers of the recent surge in mortgage rates.
  • Big jumps in rates make it more important to shop around to find a good deal. Get quotes from multiple lenders.

It’s a tough market for homebuyers and it keeps getting tougher, as mortgage rates might hit 5% sooner rather than later, one expert says.

The average 30-year fixed rate hit 4.73% last week. Rates have risen dramatically since they were around 3.3% at the start of the year. 

It might not be long before the averages hit 5%. “I think it could happen within the month,” says Skylar Olsen, principal economist at Tomo, a digital real estate and mortgage company, referring specifically to a similar survey by Freddie Mac, which at 4.67% has trended a bit lower than the Bankrate survey used here.

For many borrowers, the average 30-year fixed mortgage rate is academic, just a guideline watched by economists and news writers. Lenders are already writing mortgages at or above 5%. That means it’s even more important to get multiple quotes for a loan when you’re making what might be the biggest financial decision of your life.

“The rate highly impacts your monthly affordability for as long as you will hold this home,” Olsen says. “It is actually a critical piece of this decision, and that takes shopping around.”

Rates might not stop at 5%, Olsen says. It depends a lot on what happens in the broader economy and what steps the Federal Reserve takes to tame the highest inflation in four decades. “If inflation doesn’t come under control and the Fed’s action needs to be more aggressive, 6% is possible,” she says.

But Olsen doesn’t think the long-term outlook is for rates to be that high. When the mortgage market returns to “normal,” that will likely look a lot like it did before the pandemic, when rates were “bopping around 4.5%,” she says.

About the Latest Mortgage Rates

Except where otherwise noted, mortgage rate data in this story is based on mortgage rate information provided by national lenders to Bankrate.com, which like NextAdvisor is owned by Red Ventures.

What’s Making Mortgage Rates Go Up?

The current surge in mortgage rates stems largely from inflation and the expectations of Federal Reserve policies to bring that inflation down. The consumer price index was up 7.9% year-over-year in February, the highest since 1982, according to the Bureau of Labor Statistics. 

That high inflation, caused by a variety of factors including pandemic-related supply chain issues and rising energy costs, has prompted the Federal Reserve to start raising its benchmark short-term interest rate from the near-zero level it’s been since the pandemic started. “A big part of the rates changing is reflective of not just current Fed policy but future Fed policy,” Olsen says.

Rates will likely keep rising for a bit, Olsen says, although the picture is still fuzzy as economic and geopolitical factors like Russia’s war in Ukraine are hard to predict. “Over the next couple of months, I’m frankly very uncertain,” she says.

What Other Mortgage Industry Data Show 

The average 30-year fixed rate was 4.67% in last week’s Freddie Mac survey, an increase of a quarter of a point from last week. It’s the first time that average has been that high since December 2018.

Freddie Mac is a government-sponsored entity that buys mortgages on the secondary market, and while its survey’s methodology and the time in which it collects data differ from others, such as the Bankrate survey referenced in this article. While the mortgage rate averages vary, they show similar trends over time.

Historical Mortgage Rates: Today’s Rates Are Still Favorable 

Here’s a visual look at how current mortgage rates compare to the last 22 years.

It can be hard to remember life before the pandemic, but today’s mortgage rates are a taste of 2018. Last week’s figures are around a pre-pandemic peak we last saw in late 2018 and a couple of other peaks seen since the financial crisis of the 2000s. If you zoom out a bit more, today’s rates are still quite favorable compared to those of the early to mid-2000s, when something below 5% was unheard of.

How Can Homebuyers Deal With Rising Mortgage Rates?   

It’s important to understand that the averages reported here are just averages. The rate you get could vary significantly depending on your credit situation, your debt-to-income ratio, other financial factors and even just what lender you’re talking to. That’s why it’s important to get quotes from different lenders, Olsen says. “I think the best advice for a mortgage shopper if you’re thinking about low rates is you need to shop around and you need to look at a lot of different places.”

Especially in an environment like this, when mortgage rates can vary so much, getting a good deal is important for your long-term financial success, Olsen says. “The rate highly impacts your monthly affordability for as long as you will hold this home. It is actually a critical piece of this decision, and that takes shopping around.”

Pro Tip

When shopping around for a mortgage, talk to your realtor about making sure you find a lender that can close on time in a high-pressure real estate market.

While you’re shopping for a lender, don’t just think about who has the best rate, Olsen says. The housing market is extremely tight at the moment, and you may have to win a bidding war to actually get the house you want. Because of that, also factor in how quickly a lender will be able to get to the closing table, Olsen says. Your realtor likely has experience with different lenders and can help. “To know what lender ends up closing on time is probably pretty important to the home shopping experience right now,” she says.

How Can Existing Homeowners Deal With Rising Mortgage Rates?

The increasing mortgage rates mean fewer homeowners are in a place to refinance just to save money by getting a lower interest rate. The mortgage technology and data provider Black Knight estimated recently that about 4 million homeowners could get a rate 0.75% lower than their current figure, with only 2 million meeting eligibility criteria they consider for “high-quality refinance candidates.” When considering a refinance, what’s important to look at is how your current rate compares with available rates. Whether it’s because your credit or income has improved or your first rate was 5.5%+, if you can cut your interest rate by 0.75% then you stand to save. 

If you’re looking at a cash-out refinance, in which you refinance with the primary aim of getting money to use on something like home improvements or debt consolidation, the math might make more sense. If you’re looking at debt consolidation, consider that while mortgage rates are up to 4.5% or more, credit card rates are much higher and are also climbing. “Make sure you’re doing the math,” Jennifer Beeston, senior vice president of mortgage lending at Guaranteed Rate, told us. “Don’t just trust the lender to do the math for you.”

Whether you are looking to refinance or purchase, you can compare lender offers here using this Home Loan Comparison Calculator. You can enter in the loan amount, rate, fees, and term for each offer and see a true side-by-side comparison. 

Home loan comparison calculator

Compare your payment options side-by-side to see which is right for you and your financial situation.

Find the mortgage that’s best for you by comparing the cost of multiple loans over time.