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Mortgage Interest Rates Forecast for November 2022

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Mortgage rates are likely to continue their record rise, as they hit levels not seen in two decades. Despite strong wage and job growth, the sticker shock of 30-year rates touching 7% is crushing housing demand. To put things in perspective, average rates on Oct. 28, 2021, were at 3.14%, according to the Freddie Mac Primary Mortgage Market Survey (PMMS). On Oct. 27, 2022, the 30-year rate on the PMMS clocked in at a whopping 7.08%.

What is the current mortgage interest rate forecast?

“Given the current macroeconomic climate, it seems very likely that the average rate for a 30-year, fixed-rate mortgage will end the year above 7%,” says Jacob Channel, senior economist for LendingTree. If the federal funds rate continues to rise through the end of this year and into 2023, then mortgage rates will likely follow the same path, Channel adds.

Despite five rate hikes since March of this year — from 0.25% to 3.25% — inflation remains stubbornly high, making it more likely the Federal Reserve will continue to increase the funds rate. The Mortgage Bankers Association’s September economic forecast projects a federal funds rate of 3.875% by the end of 2022 — unwelcome news for consumers hoping for a drop in mortgage rates anytime soon.

Mortgage rates have more than doubled at the fastest pace since the 1980s, impacted by the Federal Reserve’s aggressive rate hike campaign aimed at easing inflationary pressures.

What’s causing mortgage rates to fluctuate?

Mortgage rates continue to rise because of inflationary pressures in the economy. Industries are still recovering from supply-and-demand issues related to the coronavirus pandemic, pushing food and energy prices higher. The war in Ukraine is adding to inflation’s upward trend, as the global economy continues to be affected by the conflict.

Consumers looking for clues that inflation is leveling off can start by watching their grocery and fuel bills. “Generally, I think the best indicator for whether or not inflation is beginning to subside would be for someone to see their bills remain relatively stable each month,” Channel says. “If a family buys the same groceries each month and the price of those groceries stops going up, that could be a sign inflation is cooling.”

What current mortgage rate predictions mean for homebuyers

Besides a higher payment, higher mortgage rates have a direct impact on how much money you can borrow. Lenders measure your debt-to-income (DTI) ratio by dividing your total debt — including your mortgage payment — by your before-tax income. A 43% maximum DTI ratio is the benchmark for payment affordability.

Higher rates may be discouraging, but they don’t necessarily mean there’s no hope for aspiring homebuyers. Borrowers should shop around and find a lender willing to offer them an affordable rate or look at Federal Housing Administration (FHA) loans, which can be easier to qualify for than conventional mortgages, Channel adds.

Below, you can see how the spike in rates would affect how much house a buyer — earning $85,000 annually with $250 of existing debt — qualifies for now, compared to six months ago.

Interest rate (30-year fixed)Maximum payment at 43% DTI ratioMaximum home price
3.85%*$2,795$500,526
6.92%**$2,795$394,522

*Data based on Freddie Mac PMMS, March 10, 2022. 
**Data based on Freddie Mac PMMS, Oct. 13, 2022. 

The bottom line: This homebuyer lost more than $100,000 of mortgage borrowing power due to the rapid rise in mortgage rates.

  PRO TIP: Locking in your rate when buying or refinancing a home is especially important when interest rates are volatile. Ask your loan officer about your rate lock options to avoid any surprises at the closing table. If rates have dropped since you locked, ask about a “float-down” option, which allows you to snag a lower rate if there’s a significant drop before your loan closes.

How current mortgage rates affect your monthly payment over time

The table below gives you a snapshot of the recent impact the rise in mortgage rates would have on a $300,000 loan with a 30-year and 15-year fixed-rate term, as well as with a 5/1 adjustable-rate mortgage (ARM).

MonthLoan rate typeAverage rateMonthly payment (principal and interest)
September*
  • 30-year fixed rate
  • 15-year fixed rate
  • 5/1 adjustable rate 
  • 6.02%
  • 5.21%
  • 4.93%
  • $1,802.51
  • $2,405.33
  • $1,597.66
October**
  • 30-year fixed rate 
  • 15-year fixed rate
  • 5/1 adjustable rate 
  • 6.92%
  • 6.09%
  • 5.81%
  • $1,979.82
  • $2,546.18
  • $1,762.17

*Data based on Freddie Mac’s Primary Market Mortgage Survey, Sept. 15, 2022. 
**Data based on Freddie Mac’s Primary Market Mortgage Survey, Oct. 13, 2022. 

What the numbers say: In this example, the jump in interest rates from September to October means your monthly payment is:

  • $177.31 higher per month for a 30-year fixed-rate mortgage ($2,127.72 per year)
  • $140.85 per month higher for a 15-year fixed-rate mortgage ($1,690.20 per year)
  • $164.51 per month higher for a 5/1 ARM ($1,974.12 per year)

Frequently asked questions

The Federal Reserve’s monetary policy indirectly impacts fixed-rate mortgages, which typically correlate with the 10-year U.S. Treasury bond yield. The Fed’s policies have a direct effect on short-term rates, such as those tied to ARMs, credit cards and auto loans.

A mortgage interest rate — expressed as a percentage — is the base rate you’re charged to borrow a loan. Your mortgage annual percentage rate (APR) is the total cost of borrowing a mortgage (the interest rate plus closing costs and fees) and is also expressed as a percentage.

Once you’re under contract on a home and moving through the mortgage application process, you should discuss mortgage rate lock options with your loan officer. Rate locks usually last between 30 and 60 days, or even longer. Keep in mind you may have to pay a rate-lock extension fee if your loan doesn’t close before your rate lock expires.

If you can negotiate for the seller to pay for a percentage of your closing costs, you might want to use the money to buy a discount point. Also called a mortgage point, a discount point is an upfront fee paid at closing to reduce your mortgage rate. One point is equal to 1% of your loan amount.

You can haggle for a lower interest rate by using your mortgage offers as leverage and asking each lender about matching your lowest-quoted rate. You should also consider making a larger down payment, selecting an ARM loan with a lower initial rate or asking your lender about mortgage buydown options.

“We are seeing evidence that home prices are easing,” Channel says. However, with rates as high as they are, even a double-digit drop might not make homes affordable. Even if houses dropped 20% nationwide from the current median price of $440,300 to $352,240, Channel predicts that mortgage payments may put homeownership out of reach for many consumers with rates as high as they are.

 

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