Mortgage Rates Keep Rising Faster Than Experts Expected. That Makes It Even More Important for Homebuyers to Shop Around

A photo to accompany a story about the latest mortgage rates Hannah Beier/Bloomberg via Getty Images
A home for sale is pictured in Philadelphia on Jan. 31, 2022. As mortgage rates continue to rise, experts say it’s more important than ever for homebuyers to shop around for the best rate.
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Things got tougher for homebuyers recently as mortgage rates continued to rise more quickly than experts expected. 

The average 30-year fixed rate was 4.59% last week, a rise of 19 basis points from a week earlier. Rates were below 4% just three weeks ago, and around 3.3% at the start of the year.

The rise has exceeded experts’ predictions, with persistently high inflation, the prospect of more aggressive action by the Federal Reserve to slow that inflation, and Russia’s war in Ukraine all contributing to a dramatic first quarter.

“It seems like all of what could have or was going to happen in 2022 has really happened in the past couple of months,” says Robert Heck, vice president of mortgage at Morty, an online mortgage broker.

While rate averages continue to move quickly, not all lenders are moving at the same pace, Heck says. That makes it even more important to shop around and compare offers from different lenders. “It definitely has increased the importance to do research upfront and be as prepared as possible before you even get to the point where you’re like, ‘I’m ready to make an offer,’” he 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.

Why are Mortgage Rates Increasing?

The surge in mortgage rates has continued after the Federal Reserve last week announced its first increase to its benchmark short-term interest rate since 2018 in a bid to rein in the highest inflation in 40 years. While it doesn’t directly drive increases in mortgage interest rates, the Fed’s move does influence mortgage rates, experts told us

Chairman Jerome Powell said in a speech in Washington last week that the Fed might even raise rates at a faster rate than the quarter-point hike seen last week. “We will take the necessary steps to ensure a return to price stability,” Powell said. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so.”

It remains to be seen just how the Fed’s moves will affect inflation rates, but other factors keep adding volatility to the situation, Heck says. “It’s going to be largely dependent on the Ukraine crisis and how that develops and how inflationary pressures develop across the economy.”

Expert Forecast: What Will Happen to Mortgage Rates In March?  

Mortgage rates were expected to keep rising in March, experts told us. That’s to be expected this year, as rates emerge from a historically low environment during the pandemic. “The rates will continue to climb in 2022, and I don’t think March will be any exception,” Mitria Wilson-Spotser, director of housing policy for the Consumer Federation of America, told us

Rates will also be shaped by what the Fed does, and that will rely on what happens with inflation, the war in Ukraine and other factors, experts said. “My expectation is that they’ll take a moderate approach and watch this very carefully and continue to raise rates,” Rob Cook, vice president for marketing, digital, and analytics for Discover Home Loans, told us

Pro Tip

Don’t forget to shop around for a mortgage. With rates moving quickly, different lenders might be quoting vastly different interest rates.

What Other Mortgage Industry Data Show 

The weekly survey by Freddie Mac showed the 30-year fixed rate average rising more than a quarter of a point to 4.42%. It’s up 1.25 percentage points over the last year. 

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.

Rates have risen a lot in the past few months, but if you zoom out a few years, you’ll see that these rates aren’t high from a historical perspective. Rates this high were common before the pandemic, around the end of 2018 and beginning of 2019, and rates around 4.5% would have been remarkably low before 2011.

What Can Homebuyers Do as Mortgage Rates Rise?   

With rates moving quickly, shopping around becomes even more important. Different lenders can have wide variation in interest rates, experts say. “The range of mortgage rates on any given day can be as wide as a percentage point,” Tendayi Kapfdize, chief economist at U.S. Bank, told us

Most importantly, remember that buying a house is a complex decision, and not entirely financial. You’re choosing a home, probably for a pretty long time, and the loan you use to make that purchase is just a tool for doing so. “The way that I look at it and think of it is that my decision to buy a home, homeownership, is not necessarily going to time up with the market,” Heck says. 

Consider the total costs of buying a home and buy one with payments you can expect to afford in six months, a year and longer term, Heck says. “I think that requires you not to panic too much when you see these big moves and be able to look at the overarching transaction and everything that goes into it.”

What Can Existing Homeowners Do as Mortgage Rates Rise?

Rising rates mean fewer homeowners could save money just by refinancing at a lower interest rate. Data from Black Knight, a mortgage technology and data provider, show there are 4 million homeowners who could save at least 0.75% on their mortgage by refinancing, including 2 million “high quality” refinance candidates, defined as those with a loan-to-value ratio of 80% or less and credit scores of 720 or higher. 

Homeowners can also consider a cash-out refinance, in which you take out a bigger loan than you currently owe in order to turn some of the equity in your home into cash. With home prices, and therefore equity, rising dramatically, that might be an appealing option for someone looking to do a major home improvement project or consolidate higher-interest debt. 

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. 

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