Mortgage interest rate predictions: Will rates go down in December 2021?

Tim Lucas
The Mortgage Reports editor

Mortgage rate forecast for next week (Dec. 6-10)

Mortgage rates fell slightly last week, pushed down by fears that the new Omicron Covid variant will put further strain on U.S. and world economies.

If investors remain spooked, rates could fall further next week. This is most likely to happen if additional lockdowns and travel restrictions are announced in the coming days.

Even if rates don’t fall further, immediate increases seem less likely than they did just one week ago.

Find your lowest mortgage rate. Start here (Dec 5th, 2021)

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>Related: 7 Tips to get the lowest refinance rate

Will mortgage rates go down in December?

Right now, mortgage rates are in constant flux; a little up one day, a little down the next. And It seems likely those mortgage rate trends will continue in December.

Still, most housing experts are expecting an overall upward trend through the end of 2021 and into 2022. And that’s because the forces pushing mortgage rates higher aren’t going away:

  • Inflation — Higher inflation typically leads to higher rates. And the annual U.S. inflation rate was at a 30-year high in October (the latest reading)
  • Economic recovery — Retail sales increased by a wider margin than expected in October. And unemployment claims fell to their lowest level since March 2020. Both are strong indicators of an improving economy, which should lead to increased rates
  • Fed policy changes  — As the Federal Reserve continues to pull back on its Covid-era stimulus, mortgage rates should continue to rise

But there are other forces working to pull rates down, which is why we’ve seen spikes and drops over the past few weeks.

As has been the case since 2020, Covid trends are one of the biggest indicators for mortgage rates right now.

If we see widespread Covid surges throughout the winter, U.S. and international economies could face stronger headwinds. And that could mean lower mortgage rates.

But, provided we stay on an overall path to recovery, rates should rise in the long term.

What does that mean for you as a borrower?

It means you should take low rates as they come. Whether you’re buying a home or refinancing, today’s lowest rates represent a great deal — one not worth passing up in hopes of slightly lower rates later on.

And borrowers shouldn’t try too hard to time the market.

Mortgage rates are unpredictable right now. So keep a laser focus on your own personal goals, and lock a mortgage rate when the time is right for you — regardless of what the market might do.

Get started shopping for mortgage rates (Dec 5th, 2021)

Mortgage interest rates forecast next 90 days

Average mortgage rates should rise modestly over the next 90 days. However, we may see rises and falls from week to week as the Covid and economic landscapes shift during winter and the holiday season.

Mortgage rate predictions for late 2021

Most industry pros expect mortgage rates to rise modestly through December 2021 and into 2022.

Fannie Mae, NAR, and the Mortgage Bankers Association all agree 30-year fixed mortgage rates should average around 3.10% in the fourth quarter of 2021.

Others, like Freddie Mac and the National Association of Home Builders, think mortgage rates will continue to rise, hitting averages of 3.20% or higher by the end of December.

Housing Authority30-Year Mortgage Rate Forecast (Q4 2021)
Fannie Mae3.10%
National Association of Realtors3.10%
Mortgage Bankers Association3.10%
Wells Fargo3.15%
Freddie Mac3.20%
National Assoc. of Home Builders3.25%
Average Prediction3.15%

Average mortgage rates were about flat last week. The average 30-year fixed rate remained at 3.10% according to Freddie Mac’s weekly rate survey.

Per the survey, 15-year fixed rates ticked up from 2.39% to 2.42%. And the average rate for a 5/1 ARM dropped from 2.49% to 2.47%.

Keep in mind, Freddie’s rate survey was taken early in the week before news of the Omicron variant had made headlines. Following that news, mortgage rates fell on Friday, November 26.

MonthAverage 30-Year Fixed Rate
January 20212.74%
February 20212.81%
March 20213.08%
April 20213.06%
May 20212.96%
June 20212.98%
July 20212.87%
August 20212.84%
September 20212.90%
October 20213.07%

Source: Freddie Mac

Mortgage rates are moving away from the record-low territory seen in 2020 and 2021.

But keep in mind that rates are still ultra-low from a historical perspective.

Just three years ago, in November 2018, 30-year rates were at nearly 5 percent (4.94%, according to Freddie Mac’s survey). And in November of 2019 they were averaging between 3.5 and 4.0%.

So if you haven’t locked a rate yet, don’t lose too much sleep over it. There are still great deals to be had — especially for borrowers with strong credit.

Just make sure you shop around to find the best lender and lowest rate for your unique situation.

Many mortgage shoppers don’t realize there are different types of rates in today’s mortgage market. 

But this knowledge can help home buyers and refinancing households find the best value for their situation.

Following are 3-month mortgage rate trends for the most popular types of home loans: conventional, FHA, VA, and jumbo.

October 2021September 2021August 2021
Conforming Loan Rates3.27%3.20%3.05%
FHA Loan Rates3.39%3.25%3.13%
VA Loan Rates2.96%2.81%2.73%
Jumbo Loan Rates3.19%3.17%3.02%

Source: Black Knight Originations Market Monitor Report

Which mortgage loan is best?

The best mortgage for you depends on your financial situation and your goals.

For instance, if you want to buy a high-priced home and you have great credit, a jumbo loan is your best bet. Jumbo mortgages allow loan amounts above conforming loan limits — which max out at $548,250 in most parts of the U.S.

On the other hand, if you’re a veteran or service member, a VA loan is almost always the right choice.

VA loans are backed by the U.S. Department of Veterans Affairs. They provide ultra-low rates and never charge private mortgage insurance (PMI). But you need an eligible service history to qualify.

Conforming loans and FHA loans (those backed by the Federal Housing Administration) are great low-down-payment options.

Conforming loans allow as little as 3% down with FICO scores starting at 620.

FHA loans are even more lenient about credit; home buyers can often qualify with a score of 580 or higher, and a less-than-perfect credit history might not disqualify you.

Finally, consider a USDA loan if you want to buy or refinance real estate in a rural area. USDA loans have below-market rates — similar to VA — and reduced mortgage insurance costs. The catch? You need to live in a ‘rural’ area and have moderate or low income to be USDA-eligible.

Find your lowest mortgage rate (Dec 5th, 2021)

Mortgage rate strategies for December 2021

Rates seem likely to rise in December. And they could go even higher in 2022. But there are still great opportunities to be had for home buyers and refinancing homeowners.

Here are just a few strategies to keep in mind if you’re mortgage shopping in the next few months.

Avoid higher rates with a short-term refinance

In a rising mortgage rate environment, there are certain strategies you can use to secure a lower interest rate. One is choosing a shorter loan term.

Homeowners who refinance from a 30-year mortgage into a 15-year mortgage often secure far lower interest rates. Just look at Freddie Mac’s survey as an example:

On November 18, 2021, 30-year fixed rates were averaging 3.10%. But 15-year fixed rates were averaging just 2.39% — more than 50 basis points (0.50%) lower than a 30-year loan term.

And that’s not unusual.

15-year fixed rates are almost always significantly lower than 30-year rates.

That represents a huge savings opportunity for homeowners who refinance into a 15-year mortgage. Doing so could easily save you thousands over the life of the loan.

 Just keep in mind that 15-year loan terms come with higher payments. So you’ll need to compare your options and choose the loan type that makes the most sense for your monthly budget.

Check your 15-year refinance eligibility. Start here (Dec 5th, 2021)

Check your refinance options — even if you’re not sure you’d qualify

According to Black Knight’s September Mortgage Monitor, nearly 12 million homeowners could still qualify to refinance and cut their interest rate by at least 0.75%.

And yet, many homeowners hesitate to refinance because they don’t think they’d be eligible — or because refinance closing costs are too high.

Lenders recognize these challenges. And Fannie Mae and Freddie Mac (two of the agencies that regulate mortgage lending) are working to address homeowners’ refi concerns.

Two new refinance programs, Fannie Mae’s RefiNow and Freddie Mac’s Refi Possible, are expanding refinance opportunities to low- and moderate-income homeowners.

If you make average income for your area and have a high mortgage interest rate, you might qualify to refinance with reduced closing costs.

To learn more about these programs and check your eligibility, read:

Save more by shopping around

Mortgage lenders are still offering historically low rates to good borrowers. But there’s a catch.

You can’t just look for the lowest rate advertised online. Because the rates lenders advertise aren’t available to everyone.

Those offers typically represent borrowers with perfect credit, 20% down or more, and a sterling credit history.

Those criteria won’t apply to everyone. The rate you’re actually offered depends on:

  • Your credit score and credit history
  • Your personal finances
  • Your down payment (if buying a home)
  • Your home equity (if refinancing)
  • Your loan-to-value ratio (LTV)
  • Your debt-to-income ratio (DTI)

To figure out what rate a lender can offer you based on those factors, you have to fill out a loan application. Lenders will check your credit and verify your income and debts, then give you a ‘real’ rate quote based on your financial situation.

You should get 3-5 of these quotes at minimum. Then compare them to find the best offer.

Look for the lowest rate, but also pay attention to your annual percentage rate (APR), estimated closing costs, and ‘discount points’ — extra fees charged upfront to lower your rate.

This might sound like a lot of work. But you can shop for mortgage rates in under a day if you put your mind to it. And shaving just a few basis points off your rate can save you thousands.

Compare mortgage and refinance rates. Start here (Dec 5th, 2021)

Mortgage interest rate FAQ 

What are current mortgage rates?

Current mortgage rates are averaging 3.10 percent for a 30-year fixed-rate loan, 2.42 percent for a 15-year fixed-rate loan, and 2.47 percent for a 5/1 adjustable-rate mortgage, according to Freddie Mac’s latest weekly rate survey. Your own rate could be higher or lower than average depending on your credit score, down payment, and the lender you choose to work with, among other factors.

Will mortgage rates go down next week?

Mortgage rates could fall even further next week (December 6-10, 2021) if the new Omicron coronavirus variant continues to worsen. Mortgage interest rates have already dropped on the worry that renewed travel restrictions and lockdowns will put further strain on the U.S. and world economies.

Will mortgage interest rates go down in 2022?

It’s unlikely mortgage rates will go down in 2022. The ultra-low rates enjoyed by homeowners and buyers in 2020-2021 were largely driven by the Covid pandemic. And as the pandemic (hopefully) recedes in 2022, rates should keep on climbing.

Will mortgage interest rates go up in 2022?

Yes, it’s very likely mortgage rates will increase in 2022. Along with a decline in new Covid cases, we’re seeing positive growth in the U.S. economy. Increased consumer spending, low unemployment, and a strong real estate market could all help push rates up. Not to mention, the Fed expects to have completely withdrawn its pandemic-era mortgage support by mid-2022. And that means it will no longer be keeping mortgage rates artificially low.

What is the lowest mortgage rate right now? 

Freddie Mac is still citing average 30-year rates in the high-2 and low-3 percent range. But remember that rates vary a lot by borrower. Those with perfect credit and large down payments may get below-average interest rates, while poor-credit borrowers and those with non-QM loans might see interest rates closer to 4 percent. You’ll need to get pre-approved for a mortgage to know your exact rate.  

Will there be a housing crash in 2022? 

For the most part, industry experts do not expect the housing market to crash in 2022. Yes, home prices are over-inflated. But many of the risk factors that led to the 2008 crash are not present in today’s market. Low inventory and massive buyer demand should keep the market propped up next year. Plus, mortgage lending practices are much safer than they used to be. That means there’s not a sub-prime mortgage crisis waiting in the wings.  

What is the lowest mortgage rate ever?

At the time of this writing, the lowest 30-year mortgage rate ever was 2.65 percent. That’s according to Freddie Mac’s Primary Mortgage Market Survey, the most widely-used benchmark for current mortgage interest rates.

Should I lock my rate now or wait?

Locking your rate is a personal decision. You should do what’s right for your situation rather than trying to time the market. If you’re buying a home, the right time to lock a rate is after you’ve secured a purchase agreement and shopped for your best mortgage deal. If you’re refinancing, you should make sure you compare offers from at least 3 to 5 lenders before locking a rate. That said, rates are rising. So the sooner you can lock in today’s market, the better.

Is now a good time to refinance? 

That depends on your situation. It’s a good time to refinance if your current mortgage rate is above market rates and you could lower your monthly mortgage payment. It might also be good to refinance if you can switch from an adjustable-rate mortgage to a low fixed-rate mortgage; refinance to get rid of FHA mortgage insurance; or switch to a short-term 10- or 15-year mortgage to pay off your loan early.

Is it worth refinancing for 1 percent? 

It’s often worth refinancing for 1 percentage point, as this can yield significant savings on your mortgage payments and total interest payments. Just make sure your refinance savings justify your closing costs. You can use a mortgage calculator or speak with a loan officer to crunch the numbers.

How do I shop for mortgage rates? 

Start by choosing a list of 3-5 mortgage lenders that you’re interested in. Look for lenders with low advertised rates, great customer service scores, and recommendations from friends, family, or a real estate agent. Then get pre-approved by those lenders to see what rates and fees they can offer you. Compare your offers (Loan Estimates) to find the best overall deal for the loan type you want.

What are today’s mortgage rates?

Low mortgage rates are still available. Connect with a mortgage lender to find out exactly what rate you qualify for.

Verify your new rate (Dec 5th, 2021)

1Today’s mortgage rates are based on a daily survey of select lending partners of The Mortgage Reports. Interest rates shown here assume a credit score of 740. See our full loan assumptions here.

Selected sources:

  • https://www.blackknightinc.com/category/press-releases
  • https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
  • http://www.freddiemac.com/research/datasets/refinance-stats/index.page