Mortgage interest rate predictions: Will rates go down in August 2022?

Paul Centopani
Paul Centopani
The Mortgage Reports Editor
August 8, 2022 - 17 min read

Mortgage rate forecast for next week (August 15-19)

Mortgage rates tumbled for the second week in a row, despite the Federal Reserve’s large hike in July.

The average 30-year fixed interest rate dropped from 5.30% on July 28 to 4.99% on Aug. 4, according to Freddie Mac.

It marks the first time the average 30-year FRM fell below 5% since early April. Interest rates could continue their recent roller coaster depending on inflationary pressures and the pace of economic growth.

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>Related: Cash-out refinance: Best uses for your home equity

Will mortgage rates go down in August?

Mortgage rates fluctuated greatly so far in the third quarter of 2022, with the average 30-year fixed rate swinging from 5.70% at the end of June to 4.99% on Aug. 4, according to Freddie Mac.

This followed 248 basis points (2.48%) of growth in the year’s first half. Rates varied greatly from one week to the next as the Fed wrestled with inflation. Mortgage rates experienced the largest weekly jump since 1987 of 55 basis points (0.55%) the day after the Federal Reserve’s June hike.

With the pandemic’s declining economic impact, inflation running at 40-year highs, and the Fed planning three more aggressive hikes, interest rates could continue trending upward this year.

However, concerns over an impending recession have caused rate drops and could cause more on any given week.

Experts from Fannie Mae, First American and other industry leaders are split on whether 30-year mortgage rates will keep climbing in August or level off.

“It is difficult to foresee how future expectations may shift in response to events, so the direction and magnitude of the impact is impossible to predict. The predictable component is already priced into market rates.”

Len Kiefer, deputy chief economist at Freddie Mac

Expert mortgage rate predictions for August

Nadia Evangelou, senior economist and director of forecasting at National Association of Realtors

Prediction: Rates will rise

“Unyielding inflation and the Federal Reserve’s tightening policy are the main factors that drive up today’s mortgage rates. It’s possible that rates will reach 6% in August.

Even though the July Fed rate hike will be more aggressive [than previous ones this year], it’s expected to have a smaller impact on mortgage rates. Data shows that mortgage rates have already priced in some of the effects.”

Selma Hepp, deputy chief economist at Corelogic

Prediction: Rates will moderate

“With worsening headline inflation and strong job numbers in June, and the Fed’s focus on reeling in inflation expectations, the Fed will remain aggressive in tightening financial conditions.

It is widely expected that FOMC will raise its target range for the federal funds rate by 75 basis points on July 27, but surprises are possible with some expecting a 100 bps increase. Mortgage rates could increase again prior to the July meeting but should continue to oscillate around 5.5%, particularly in light of significant housing demand deterioration seen over the last month.”

Joel Kan, associate vice president of industry surveys and forecasts at Mortgage Bankers Association

Prediction: Rates will moderate

“Higher interest rates resulting from the Fed’s efforts to combat inflation, as well as the persistently high rate of inflation, are causing stresses for households and businesses. We expect the Federal Reserve will continue to tighten and the tighter financial conditions will lead to weaker growth.

While inflation remains stubbornly high, the Fed’s rate hikes and weakening demand will push the inflation rate down over the next year. We expect inflation to end the year at around 6% before declining to a 2-2.5% range in 2023 and 2024.”

Len Kiefer, deputy chief economist at Freddie Mac

Prediction: Rates will moderate

“Our latest Freddie Mac forecast has mortgage rates flat for the quarter, averaging 5.5% for the 30-year fixed rate. Any FOMC policy decision and the statements around the July meeting will have a large impact on the rate outlook.

As analysts are widely expecting an increase in the federal funds rate, how the market interprets future policy movements is likely to have a larger impact on how long-term mortgage rates respond than any actual July policy change. It is difficult to foresee how future expectations may shift in response to events, so the direction and magnitude of the impact are impossible to predict. The predictable component is already priced into market rates.”

Odeta Kushi, deputy chief economist at First American

Prediction: Rates will moderate

“Interest rates will likely drift higher until there is sustained evidence that inflation has begun to recede. However, because the 30-year, fixed mortgage rate is loosely benchmarked to the 10-year Treasury note, geopolitical and economic uncertainty can put downward pressure on rates. The push-and-pull dynamic created by the opposing forces in the bond market may result in some week-to-week volatility for mortgage rates.

The July Fed meeting and likely rate hike may put some upward pressure on mortgage rates, but the increase will be muted because mortgage rates have already priced in some of the effects of upcoming Fed rate hikes. However, if the next rate hike is larger than expected, it may cause mortgage rates to rise faster.”

“Interest rates will likely drift higher until there is sustained evidence that inflation has begun to recede.”

–Odeta Kushi, deputy chief economist at First American

Taylor Marr, deputy chief economist at Redfin

Prediction: Rates will moderate

“I expect very little change in mortgage rates, but several key items could change how interest rates move. For example, the Fed could surprise us with more aggressive rate hikes, there could be new signs of accelerating/decelerating inflation, or maybe the next jobs report will be weaker than expected.

If the Fed follows the expected course of a fairly aggressive rise in the federal funds rate to tame inflation, there should be very little impact on mortgage rates, which have largely priced this path in already.”

Rick Sharga, EVP of market intelligence at Attom Data Solutions

Prediction: Rates will rise

“Mortgage rates on 30-year fixed-rate loans briefly dipped down to 5.5% recently before rebounding, and have continued to slowly climb back up. It seems most likely that August will continue that pattern of a slow, steady increase.

Driving factors include stubbornly high inflation rates, yields on the 10-year U.S. Treasury rising past 3%, and the Federal Reserve continuing to unwind its position in the bond markets. Given the current set of market dynamics, it’s unlikely that we’ll see rates reverse course and move down anytime soon.”

Mortgage interest rates forecast next 90 days

Outside of the uncertainty surrounding the Russian-Ukrainian war or possible new Covid restrictions slowing the economy, the Federal Reserve’s aggressive rate hike plan points toward further mortgage rate growth.

In all likelihood, average interest rates will increase over the next three months. Of course, mortgage rates tend to be volatile so we could see some drops mixed in as well.

Mortgage rates forecast chart showing predicted 30-year mortgage rates through September 2022. Mortgage rates are expected to rise

Mortgage rate predictions for 2022

The average 30-year fixed-rate mortgage ended the second quarter of 2022 at 5.52%, according to Freddie Mac.

All six of the major housing authorities we gathered project the average for the third quarter to drop below that.

Mortgage Bankers Association and National Association of Realtors sit at the low end of the group, estimating the average 30-year fixed interest rate will settle at 5.2% by the end of Q3. Meanwhile, Fannie Mae and Freddie Mac shared the highest prediction, with a forecast of 5.5% by the end of September.

Housing Authority30-Year Mortgage Rate Forecast (Q3 2022)
Mortgage Bankers Association5.20%
National Association of Realtors5.20%
National Association of Home Builders5.25%
Wells Fargo5.30%
Fannie Mae5.50%
Freddie Mac5.50%
Average Prediction5.33%
Mortgage rate chart showing rate predictions for Q3 2022 from major housing authorities. Experts expect rates to stay below 6 percent

Average mortgage rates took another big fall for the second week in a row.

The average 30-year fixed rate dropped from 5.30% to 4.99% for the seven days ending Aug. 4, according to Freddie Mac’s weekly rate survey.

Similarly, the 15-year fixed rate fell from 4.58% to 4.26%, while the average rate for a 5/1 ARM decreased from 4.29% to 4.25%.

MonthAverage 30-Year Fixed Rate
July 20212.87%
August 20212.84%
September 20212.90%
October 20213.07%
November 20213.07%
December 20213.10%
January 20223.45%
February 20223.76%
March 20224.17%
April 20224.98%
May 20225.23%
June 20225.52%

Source: Freddie Mac

Mortgage rates moved on from the record–low territory seen in 2020 and 2021 but are still below average from a historical perspective.

Dating back to April 1971, the fixed 30–year interest rate averaged 7.77%, according to Freddie Mac.

So if you haven’t locked a rate yet, don’t lose too much sleep over it. You can still get a great deal — especially if you’re a borrower 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.

June 2022May 2022April 2022
Conforming Loan Rates5.79%5.34%5.42%
FHA Loan Rates5.59%5.25%5.28%
VA Loan Rates5.34%4.95%5.08%
Jumbo Loan Rates5.34%4.92%4.89%

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 $ 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.

Mortgage rate strategies for August 2022

Mortgage rates grew fast and furiously to open 2022. The pace slowed in the second quarter, then interest rates shot up after the Fed’s 0.75% federal funds rate hike in mid-June. The central bank said it anticipates multiple similar hikes in 2022. In all likelihood, mortgage rates will climb throughout the rest of the year as a means to offset inflation. However, opportunities to lock in a low interest rate do still exist for home buyers and refinancing homeowners.

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

Consider an adjustable-rate mortgage

If this year’s growing interest rates deterred you from buying a home, an adjustable-rate mortgage (ARM) could be more financially accommodating. The average rate on a 5/1 ARM was over a full percentage point lower than a 30-year fixed-rate mortgage (FRM) as of July 21, according to Freddie Mac.

“The rate on a 5/1-year ARM is still below 4.5%. Thus, for the median-priced home, the monthly mortgage payment is about $300 lower than the payment for a 30-year FRM,” Evangelou said. “If they plan to sell or refinance in the next 5 years, a 5/1-year ARM may make more sense.”

While some borrowers may shy away from locking in a short-term interest rate, the flexibility of ARMs can prove advantageous. The rate adjusts once the initial term ends, but there are caps in place that limit how much it can change and ARMs don’t necessarily increase. The adjustment gets based on the current market conditions and any terms agreed to at closing between the borrower and lender.

Don’t leave money on the table

Not all interest rates are created equal. Many borrowers receive a mortgage rate quote and settle on it instead of getting multiple quotes from multiple lenders. But this can be a mistake, especially considering how volatile interest rates can be from week to week and even day to day.

“Shop around for your mortgage,” Kushi recommends. “Interest rates may vary dramatically between lenders, so failure to shop is money lost.”

And if shopping around doesn’t result in improving your rate, you can buy mortgage points to drop it lower. “This will have a much greater impact on lowering your monthly mortgage payment than a lower [home purchase] price would,” said Marr. Over time, paying down your rate at closing can save you thousands of dollars over the life of your home loan.

“Interest rates may vary dramatically between lenders, so failure to shop is money lost.”

-Odeta Kushi, deputy chief economist at First American

How to shop for interest rates

Rate shopping doesn’t just mean looking at the lowest rates advertised online because those aren’t available to everyone. Typically, those are offered to borrowers with perfect credit and who can put a down payment of 20% or more.

The rate lenders actually offer 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 three to five of these quotes at a 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.

Mortgage interest rate FAQ

What are current mortgage rates?

Current mortgage rates are averaging 4.99% for a 30–year fixed–rate loan, 4.26% for a 15–year fixed–rate loan, and 4.25% for a 5/1 adjustable–rate mortgage, according to Freddie Mac’s latest weekly rate survey. Your individual rate could be higher or lower than the 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 decrease next week (Aug. 15-19, 2022) if the mortgage market takes a cautious approach to a possible recession on the horizon. However, rates could rise if commentary from the Federal Reserve implies more aggressive measures will be needed to counteract the high inflation of 2022.

Will mortgage interest rates go down in 2022?

It’s unlikely mortgage rates will go down in 2022. Inflation has been climbing at a record rate over the last few months. And the Fed is planning to raise interest rates after each of its scheduled FOMC meetings. Both these factors should lead to significantly higher mortgage rates in 2022.

Will mortgage interest rates go up in 2022?

Yes, it’s very likely mortgage rates will increase in 2022. High inflation, a strong housing market, and policy changes by the Federal Reserve should all push rates higher in 2022. The only thing likely to push rates down would be a major resurgence in serious Covid cases and further economic shutdowns. But, while it could help mortgage rates, no one is hoping for that outcome.

What is the lowest mortgage rate right now? 

Freddie Mac is now citing average 30-year rates in the 5 percent range. If you can find a rate in the 4s, you’re in a very good position. 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 could see much higher rates. 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 subprime 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 three to five 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 three to five 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?

Mortgage rates are rising, but borrowers can usually find a better deal by shopping around. Connect with a mortgage lender to find out exactly what rate you qualify for.

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.

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