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

Tim Lucas
Tim Lucas
The Mortgage Reports Editor
January 17, 2022 - 13 min read

Mortgage rate forecast for next week (Jan. 24-28)

Mortgage rates climbed for the third consecutive week.

They spiked to an average of 3.45% as of January 13, making the largest weekly jump since March 2020.

A combination of inflation and the Federal Reserve’s tightening monetary policies drove rates higher, which is expected to continue throughout 2022.

Find your lowest mortgage rate. Start here (Jan 20th, 2022)

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

Will mortgage rates go down in January?

So far, every week of 2022 came with increasing mortgage rates.

Multiple rate hikes are anticipated for the year as the Federal Reserve adjusts to counter high inflation.

Negative developments with the pandemic could potentially halt interest rate growth or send them lower but for now, all signs point upward.

“The rise in mortgage rates has not yet affected purchase demand, but given the fast pace of home price growth, it will likely dampen demand in the near future,” said Sam Khater, Freddie Mac’s Chief Economist.

The market keeps reacting to the Federal Reserve’s announcement that it would speed up the pace of tapering to combat those high inflation numbers.

The Fed expects to end its mortgage stimulus program by March or April of 2022. That could mean significantly higher mortgage rates in the first quarter of the year.

Remember that the Fed’s bond purchases throughout the pandemic were keeping mortgage rates artificially low. As the Fed pulls back (‘tapers’) those purchases, mortgage rates will almost certainly rise.

As of its last meeting, the Fed expects to end its mortgage stimulus program by March or April of 2022. That could mean significantly higher mortgage rates in the first quarter of the year.

For now, though, interest rates remain near historic lows.

If you’ve put off refinancing a home or purchasing a new home, January 2022 could be the time to do it. The window to take advantage of today’s low–rate environment could close quickly.

Get started shopping for mortgage rates (Jan 20th, 2022)

Mortgage interest rates forecast next 90 days

Despite some minor economic slowdown due to the Omicron variant, consumer sentiment is still strong. Provided the economy continues to grow and shed its Covid worries, mortgage rates should rise slowly in the first quarter of 2022. As always, there might be short periods of stagnant or falling rates within the overall upward trend.

Mortgage rate predictions for 2022

Major housing authorities are expecting higher mortgage interest rates in the first quarter of 2022.

Fannie Mae offers the lowest prediction, putting 30–year fixed interest rates at 3.10% by the end of Q1. Wells Fargo and Freddie Mac are at the other end of the spectrum, predicting 30–year rates as high as 3.35% or 3.40% in early 2022.

Housing Authority30-Year Mortgage Rate Forecast (Q1 2022)
Fannie Mae3.10%
National Assoc. of Home Builders3.26%
National Association of Realtors3.30%
Mortgage Bankers Association3.30%
Wells Fargo3.35%
Freddie Mac3.40%
Average Prediction3.29%

Mortgage rates surged last week (Jan. 13) as the average 30–year fixed rate went from 3.22% to 3.45%, according to Freddie Mac’s weekly rate survey.

That marked the biggest weekly jump since the average went from 3.36% to 3.65% on March 19, 2020.

Per the survey, 15–year fixed rates grew from 2.43% to 2.62%, while the average rate for a 5/1 ARM rose from 2.41% to 2.57%.

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%
November 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 December 2018, 30–year rates were at 4.75% according to Freddie Mac’s survey. And in December 2019 they were averaging around 3.75%.

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.

November 2021October 2021September 2021
Conforming Loan Rates3.27%3.27%3.20%
FHA Loan Rates3.38%3.39%3.25%
VA Loan Rates2.96%2.96%2.81%
Jumbo Loan Rates3.24%3.19%3.17%

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.

Find your lowest mortgage rate (Jan 20th, 2022)

Mortgage rate strategies for January 2022

Mortgage rates are on the rise, and that trend should continue in January 2022 and beyond. 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.

Make lenders compete for your rate

Higher rates generally aren’t great news for borrowers. But there may be a silver lining.

When rates rise, fewer homeowners are motivated to refinance. That means lenders are seeing slower business and will be more eager to bring in new customers.

You can use this environment to your advantage by making mortgage lenders compete for your refinance loan.

By getting just a few quotes and asking lenders to match or beat the competition, you could lower your interest rate, refi closing costs, or both.

Shopping around can easily save you thousands of dollars over the life of your mortgage. And making lenders compete will maximize your savings. So don’t be afraid to ask for a better deal.

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 (Jan 20th, 2022)

Mortgage interest rate FAQ

What are current mortgage rates?

Current mortgage rates are averaging 3.45% for a 30–year fixed–rate loan, 2.62% for a 15–year fixed–rate loan, and 2.57% 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 (January 24–28, 2022) depending on if the surging Omicron variant case numbers necessitate a lockdown. In all likelihood, rates should generally trend upward behind the Fed’s updated policies to combat inflation.

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 wind down its mortgage stimulus and raise interest rates sooner than initially expected. 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. Hight 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 still citing average 30–year rates in the 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.

Show me today's rates (Jan 20th, 2022)

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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