Thinking About a Home Loan? Lock In Your Rate Now Before Interest Rates Rise!
Inflation is everywhere in 2022, and consumers are feeling it when they go to the grocery store, to the gas pump, and even to buy a new car. The housing market has also been affected by recent global events, and interest rates are on a roller coaster ride. They’re rising and falling almost every single day, but experts agree that higher interest rates will be the norm throughout this year (and possibly beyond).
The Reason for the Rise
With the worst of the COVID pandemic behind us, many people believed that their lives – and costs – would return to some semblance of normalcy. However, Russia’s invasion of Ukraine has really lit a fire under the global economy, and the mercury is rising fast. Americans are experiencing incredible price hikes across the board, as well. Gasoline is well above $4 a gallon in many places, and the cost of a gallon of milk has doubled or even tripled at the grocery store. Unfortunately, the housing market is not immune to inflation, either; in March 2022, the average rate for a 30-year fixed mortgage hit 4.72%.
The Federal Reserve’s Plans
As if the inflation weren’t enough to cause mortgage interest rates to climb, the Federal Reserve is actively planning six rate hikes this year. Back in January, the central bank addressed the historically high inflation and announced that it would continue to raise rates in an effort to combat it. This is the first rate hike from the central bank since 2018, and the Federal Reserve cites economic activity indicators and employment statistics as proof that the economy is pressing forward full steam ahead – all despite record inflation. The Mortgage Bankers Association predicts that despite wild fluctuations this spring and throughout the year, the average 30-year fixed rate mortgage will settle in at about 4.5% by the end of 2022.
What This Means for You
If you have been thinking of buying a home or refinancing your existing home, now is the time to get the ball rolling. The Federal Reserve does not set interest rates across the nation, but the actions it takes and the policies it creates are very closely correlated with actual mortgage interest rates. As such, experts across the board are confident that interest rates will continue to rise throughout the year. By getting the buying or refinancing process started today, you can have the opportunity to lock in the lower interest rates before any further rate hikes take effect.
How to Get Started
If you are a first-time buyer interested in becoming a homeowner, you need to act quickly if you want to lock in a low interest rate. The first step in the process involves getting preapproved for a loan, which involves gathering all of your documents and talking to a lender about your options. To get preapproved, you will need to meet certain credit-related criteria, and in many cases, you’ll also need to be able to pay a down payment of anywhere from 10% to 20% of your loan’s overall value. From there, your lender can help you navigate the process and secure your lower interest rate. Although a few tenths of a percentage point seems very small when it comes to interest rates, those tenths can add up to tens of thousands of dollars over the life of your loan.
If you’re seriously considering homeownership, or if you’ve been thinking about refinancing your home to lock in a lower interest rate, now is the time to do it. Interest rates will rise throughout 2022, but if you act quickly and get yourself approved for a loan right away, you can lock in a lower rate for the life of your loan.