Mortgage Rates Are Fast Approaching 5%, But Here’s Why ‘Now Could Still Be a Good Time to Buy a House’

A photo to accompany a story about the latest mortgage rates Tada Images/Adobe Stock
A ‘sale pending’ sticker is seen on a real estate yard sign outside a newly-constructed single family home in Lake Oswego, Oregon on November 2, 2021. Homebuyers are feeling the pinch with rising mortgage rates and home prices. But experts say it's still a good time to buy.
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.

Between the median home listing price topping $400,000 for the first time and mortgage rates on the cusp of 5%, times have quickly gotten tough for homebuyers.

That doesn’t mean you need to give up, just be strategic about shopping for a home, says Jacob Channel, senior economic analyst at LendingTree.

“Now could still be a good time to buy a house, especially if you shop around for a mortgage, if you work on having a good credit score and a solid down payment,” he says. “It’s going to be a little bit of a challenge.”

The average 30-year fixed mortgage rate hit 4.95% ;last week, rising 22 basis points from the previous week and moving closer to a 5% milestone one expert told us last week could happen soon. Rates are up dramatically since the start of the year, when the average was around 3.3%.

“I know it can be scary if you read the news and see inflation is high, rates are high, and whatnot,” Channel says. “Always remember that any time can be a good time to buy a house.”

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 surge in mortgage rates so far this year is due to a variety of economic factors. Persistently high inflation is a big one, Channel says. Inflation was 7.9% in February according to the Bureau of Labor Statistics, the highest in 40 years. Interest rates tend to rise when inflation is high, he says. The Federal Reserve has also signaled it intends to take aggressive action – raising its benchmark short-term interest rate and making other moves – to rein in inflation, which could lead to further increases in interest rates.

On top of that, financial markets are still responding to other global factors that can affect the economy, namely the prospect of a resurgence of COVID-19 and Russia’s invasion of Ukraine. “​​We have a lot of factors like that that are putting upward pressure on mortgage rates,” Channel says.

Expert Prediction: Where Will Mortgage Rates Go in April?

Rates will probably keep moving up in April, experts told us. “I do think interest rates will continue to rise in April, I just don’t think it’s going to be as sharp of an increase as we saw from February into March,” Jodi Hall, president of Nationwide Mortgage Bankers, a national lender, told us.

Those predictions come with a grain of salt: A lot can change in the economy, and it can change quickly. “There’s just so much uncertainty in the marketplace at the moment that it’s so difficult to say exactly where they’re going,” Mike Schenk, chief economist for the Credit Union National Association, told us.

What Other Mortgage Industry Data Show 

The average 30-year rate was also up in a similar survey by Freddie Mac, rising five basis points to 4.72%. It’s up a point and a half in the past three months, the fastest three-month rise since 1994, Freddie Mac said.

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.

The recent rise in mortgage rates looks dramatic after two years of rates around 3%, but even 5% isn’t too bad from a broader historical perspective. Compare it to where rates were before the 2008 financial crisis, when 5% would’ve been pretty good. 

Home Prices Are Rising Too

A mortgage doesn’t exist in a vacuum, it’s a loan used to pay for property, so it’s important to consider rates alongside what’s happening to housing prices. Data from Realtor.com show the median U.S. home listing price was $405,000 in March, the first time it’s ever been over $400,000. That’s up 26.5% from two years earlier.

Experts tell us housing prices are up so dramatically because of a mismatch between supply and demand: There are a lot of people trying to buy houses and there aren’t enough houses to go around. That means you probably shouldn’t wait around and hope for the market to crash. Instead be strategic and patient with your home search. “I don’t think buyers should be betting on any really significant price declines,” Robert Dietz, chief economist at the National Association of Home Builders, told us. “If anything, as interest rates move higher, the cost of buying a home is going to go up.”

How Can Homebuyers Deal With Rising Mortgage Rates?   

It’s more important than ever to shop around for a mortgage when you’re in the market for a house, Channel says. When rates aren’t going up as dramatically as they are now, quotes from different lenders can regularly vary by half a percentage point. With the market moving so quickly, that could be even higher. 

Know that buying a home isn’t just about getting a mortgage rate, Channel says. Be sure you’re in a good position to buy a house. “The most important thing that any would-be homebuyer should do is take stock of where they are personally,” he says. “Do I have enough cash to make my mortgage payments, to put money down on a down payment? Is my credit score good?”

Then, be patient and be creative with your home search. Don’t rush for the first houses you see, he says. Look in unexpected places. One possibility is the U.S. Department of Housing and Urban Development’s page of foreclosed homes. “The more you plan and the more diligent you are before you really even start going out house hunting actively, the easier it is to navigate a housing market that is as hot and fast as this one,” Channel says.

Is Refinancing Still a Good Option? 

Rising rates mean fewer people can save money just by refinancing to get a lower interest rate. Black Knight, a mortgage technology and data provider, found 4 million homeowners could get a rate at least 0.75% lower by refinancing, with 2 million of those being “high-quality refinance candidates” who meet certain eligibility criteria. 

While the demand for refinances has cooled off significantly, there could still be other reasons to do it, Channel says. One is for a cash-out refinance, in which you tap into the equity of your home to get cash for something like a home improvement project or debt consolidation. You might also want to convert a 30-year fixed rate loan to a 15-year loan or vice versa. “If you are in a position where you think you would benefit from modifying your loan in some way, it doesn’t hurt to ask a lender what they can offer you,” Channel says.

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.