Mortgage Rates Are Back Above 4% for the First Time Since 2019. Experts Say That May Not Be a Problem for Homebuyers

A photo to accompany a story about the latest mortgage rates Scott Olson/Getty Images
Pictured here is a home for sale in Chicago, Illinois on January 20, 2022. Like the rest of the nation, Chicago is experiencing a shortage of homes on the market, rising inflation, and rising mortgage rates.
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 hit 4.03% last week, topping 4% for the first time since July 2019 after several weeks of steady rises.

That dramatic increase in mortgage rates shouldn’t weigh too heavily on homebuyers, who are also contending with rising home prices, says Ralph McLaughlin, chief economist at Kukun, a property data and analytics firm.

“If you’ve made a decision to buy a house because of life circumstances, I wouldn’t let the difference between a 3.5% and a 4% mortgage rate impact your decision,” he says. 

After two years of rates around or below 3%, seeing rates above 4% may be startling for those seeking a mortgage. Consider that rates around this level were common in the years before the pandemic, which were considered good years for mortgage rates.

Though the trend might push more people into the buying market, McLaughlin says, as buyers see interest rates going up and think they should buy before rates go up more.

Experts have pointed to a variety of factors for the surge at the start of 2022, including inflation of 7.5% in January, the highest in 40 years. McLaughlin says other economic indicators pointing to a recovery from the pandemic have also helped push rates up. Mortgage rate changes often follow changes in the price of 10-year U.S. Treasury bonds, which have gone up similarly in the past few months.

“What we’ve seen over the last six months is a general agreement that the economy is doing really, really well, job growth is doing exceptionally well,” he says. “We’re really showing signs of recovery. The stock market, though it’s been up and down, generally has been on its way up. That’s caused the 10-year Treasury note to increase, and as a result causes mortgage rates to increase.”

While many indicators show an economy on the mend, the high inflation rate still poses concerns for consumers, experts have told us. It means higher prices for basic necessities like food and electricity, which combined with a tough housing market add to the challenges faced by people looking to buy a house this year. It also presents uncertainty as the Federal Reserve eyes changes to its policies, such as its benchmark short-term interest rate, to reduce inflation. Those changes, expected to start in March, could have ripple effects through the economy.

As for what mortgage interest rate changes will mean for the housing market, McLaughlin says the growth of home prices might slow but don’t expect them to come down. But home prices are up not just because of low mortgage rates but also limited supply for homes, including new construction, and significant demand. 

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.

Expert Predictions for Mortgage Rates This February

Experts told us earlier this year that they anticipated volatility in interest rates, with jumps expected. The economic picture is hard to predict, however, they said. With inflation, Federal Reserve moves, and possible COVID variants causing uncertainty. “Unless you know what the virus is going to do, it’s unlikely that you know what interest rates are going to do, and I don’t know that anybody knows what the virus is going to do,” Tendayi Kapfidze, head of economic analysis at U.S. Bank, told us.

With Fed changes expected to start in March, it will be important to watch how the rest of the economy responds, said Ali Wolf, chief economist at Zonda, a California housing data and consultancy firm. “We saw interest rates jump at the beginning of this year, but we think the market’s going to have a lot more volatility moving forward,” she said

Highs and Lows of the Average 30-Year Fixed Mortgage Rate

Here’s a look at how current mortgage rates compare to the last few years, along with inflation rate and national home prices for each year. 

2019202020212022 (through Feb. 17)
Highest 30-year Fixed Mortgage Rate4.05%3.88%3.34%4.03%
Lowest 30-year Fixed Mortgage Rate3.74%2.95%2.93%3.4%
Inflation Rate2.3%1.4%7%7.5%
Median Home Sale Price $274,600$300,200$353,400N/A
*National Association of Realtors data on existing single-family home sales. 

The 4.03% reported last week is the highest the 30-year fixed rate has been since before the pandemic, but it’s on par with rates from 2019, which was still a good year for mortgage rates. 

What Other Mortgage Industry Data Show 

A similar rise occurred in the 30-year fixed rate in a similar survey by Freddie Mac, which was up 23 basis points to 3.92%. The rate in that survey hasn’t been that high since May 2019. 

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

New Homebuyers: What Last Week’s Mortgage Rates Mean For You   

If you’re in the market for a home, the difference in the increased rates can affect affordability. It might increase your monthly payment or lower your purchasing power based on what your lender qualifies you for. But even with rates around 4%, that isn’t a huge change from what they were at the start of the year, McLaughlin says. Rates around 4% have been common in the past decade, with the average hitting around 5% in 2018, according to Freddie Mac. Before 2008, rates were regularly 6% or higher.

The most important thing to consider when buying a house is if now is the right time for you to buy a house. Make that decision based on your lifestyle, your goals, and your current financial situation. Remember that your mortgage payment will stay steady while rents keep going up. “The benefits of homeownership do not come exclusively because of mortgage rates,” McLaughlin says. “They come in spite of mortgage rates.”

Remember that the averages reported in these surveys are just that – averages. The actual mortgage rate you can get depends on many different things, including your personal financial picture and your lender. Get quotes from different lenders to ensure you can get the best deal. 

Try out your calculations in NextAdvisor’s mortgage calculator to see what payments might look like. Also keep an eye on that preapproval letter as rates change suddenly: You might be qualified for a monthly payment, and the buying power of that monthly payment might drop while you’re looking, Shashank Shekhar, founder and CEO of InstaMortgage, told us. Check regularly with your loan officer. 

Existing Homeowners: What Last Week’s Mortgage Rates Mean For You

Rates topping 4% might change your thinking around refinancing, depending on your goal. If you’re considering a refinance for the purpose of lowering your interest rate and saving money on your monthly payment, that might make sense only for those with rates close to or above 5% now, McLaughlin says. Data from mortgage technology and data provider Black Knight found that with rates rising, the number of “high-quality refinance candidates” is down to about 3.8 million nationwide, from 11 million at the start of the year and nearly 20 million in 2020. Those 3.8 million homeowners could save an average of $284 per month, per Black Knight.

For a cash-out refinance, 4% might not be too bad of a rate, but McLaughlin says it depends on your plans for the cash. If it’s for an investment that returns a higher rate, or a project that will increase the value of your home, such as a new bedroom or bathroom, then 4% could be a good deal. It’s also not a bad rate if you’re considering consolidating higher-interest debt such as from credit cards. “If it’s just purely to take it out and blow it on entertainment or stuff that doesn’t add good value to a household’s finances, I would say buyer beware,” he says.

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.