Will FHA mortgage rates go up or down in 2022? That’s the big question for a lot of future home buyers and mortgage shoppers in the U.S. According to a recent forecast, FHA rates could rise a bit during 2022. In fact, we’re seeing some indications of this already…
Lately, many housing market analysts and economists have predicted that we could see higher mortgage rates in 2022. And judging by recent trends, they seem to have hit the nail right on the head.
FHA loan rates rose quite a bit over the past few weeks, and they could go up even more during 2022. These recent trends and mortgage rate forecasts could create a sense of urgency among home buyers. If I were in the market to buy a house (and using a loan to do it), I’d want to act sooner rather than later.
The takeaway: It seems likely that FHA rates could go up even further in 2022, from where they are in late-January. At the same time, home prices are expected to continue climbing in most U.S. cities.
FHA Rates on the Rise in Early 2022
Last week, the government-controlled mortgage buyer Freddie Mac published the results of its latest nationwide survey of mortgage rates. According to their report, the average rate for a 30-year fixed home loan (FHA and conventional) rose to 3.56% for the week ending January 20, 2022.
That was the fourth week in a row that mortgage rates rose. It also marked the highest average in nearly two years. That last part bears repeating: Not since March of 2020 have 30-year mortgage rates averaged above 3.5%. See the chart below for more.
The chart above shows the average mortgage rate for a 30-year fixed home loan over the past year or so. It was published alongside Freddie Mac’s latest industry survey, on January 20, 2022.
On the far-right side, you’ll notice the steady upward movement that occurred over the past four weeks. That trend applies to both conventional and FHA loans, and it serves as a wake-up call to mortgage shoppers who are currently “on the fence.”
The Long-Range Mortgage Rate Outlook
So that answers the first question: Will FHA rates go up in 2022? They already have! See the chart above for evidence of this.
Which leads to the next question: Will FHA mortgage rates continue to rise over the coming months? And if so, by how much?
No one can predict future interest rate movements with accuracy. There are too many variables involved, ranging from the stock market to inflation to global developments. Even so, several notable forecasters have predicted that FHA rates will likely go up further over the coming months.
One such forecast was issued by the Mortgage Bankers Association on January 21st. In that report, the industry group predicted that 30-year mortgage rates could average around 4% by the end of this year. That would be a sizable increase from where we are right now, as of late-January 2022.
Economists from Freddie Mac also expect conventional and FHA loan rates to increase, as we move further into 2022. In a statement issued last week, the group wrote:
“Freddie Mac today predicted that the single-family housing market will remain stable in 2022 even as mortgage rates are expected to increase.”
Granted, today’s home loan rates are still fairly low from a historical standpoint. They were around 8% in 2000, above 10% in the 90s, and even higher during the Reagan administration. Still, the current upward trend could create a sense of urgency among home buyers.
It’s also worth noting that these forecasts are far from certain. FHA loan rates are expected to go up in 2022, based on current economic conditions and trends. But that’s not a foregone conclusion. We should view these kinds of predictions for what they are — an educated guess.
And right now, the general consensus is that FHA loan rates could go up even more during 2022.
Rising Home Prices Another Concern for Buyers
Home buyers who are considering a purchase in the near future should also keep a close eye on home-price trends in their area.
Prices nationwide rose at a rapid pace during 2021, breaking records in many U.S. cities. This was largely due to a severe shortage of homes for sale, relative to buyer demand.
According to Zillow, the national median home value rose by a whopping 19.7% over the past year alone. (This was reported in late-January.) Looking forward, the company predicted that prices would rise by double-digits over the next 12 months.
Just keep in mind that real estate conditions can vary from one city to the next. Some housing markets could see slower home-price growth this year, while hotter markets could far exceed the national average.
The bottom line here is that housing costs will likely continue to rise over the coming months. Numerous forecasts predict that FHA mortgage rates will continue to go up in 2022, along with a continued rise in home prices. This gives home buyers a lot to think about — and a reason to expedite their purchases.
Related article: Using an FHA loan in 2022
Disclaimer: This article includes third-party predictions from sources not associated with the publisher. The publisher of this website makes no assertions about future mortgage industry trends.