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%Begin Mortgage Rate Forecast For December 2021: Expect Higher Rates Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
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Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories.
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But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: KENA BETANCUR/AFP via Getty Images December 01, 2021 Erik J.
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Martin is a Chicago area-based freelance writer/editor whose articles have been featured in AARP The Magazine, Reader's Digest, The Costco Connection, The Motley Fool and other publications. He often writes on topics related to real estate, business, technology, health care, insurance and entertainment.
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Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal. Bankrate logo
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While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo
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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices.
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We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy.
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Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner. Bankrate logo
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Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate.
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Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
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Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site.
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Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site.
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While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Santa Claus may be coming to town, but he’s likely bringing higher with him. Approaching the holidays, all signs pointed to rising rates in the days and weeks ahead — at least until a new coronavirus mutation sparked new fears that the pandemic might enter a new phase.
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The World Health Organization warned Sunday that the omicron variant poses “very high” global risk — and is likely to spread internationally. While it’s too soon to know the effect on mortgage rates, this latest twist means the pandemic could continue to roil consumer spending, disrupt travel plans and frighten investors.
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The coronavirus scare of 2020 sent mortgage rates to record lows, and a new round of uncertainty could cloud the rate picture. In January 2020, the average rate on a 30-year mortgage fell below 3 percent, according to Bankrate’s national survey of lenders. But by New Year’s Eve, those rates may have increased by 40 basis points — if the omicrom variant proves mild.
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What kind of rate can you expect for your upcoming mortgage purchase or refinance loan? We’ve talked to the experts and gotten their rate predictions for December and beyond.
Dreaming of a white Christmas and lower rates
The warning signs about increasing inflation haven’t subsided in recent weeks, leaving many industry insiders pessimistic about the mortgage rate environment, even if recent jobs reports look promising, wider economic data appear bullish, and the recently passed infrastructure bill appears to be a step in the right direction.
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“With inflation elevated and the Federal Reserve holding true to its promise to begin tapering bond purchases, mortgage rates will continue moving higher by the end of the year,” says Greg McBride, Bankrate’s chief financial analyst.
He foresees the 30-year fixed rate clocking in as high as 3.5 percent, on average, compared to an average rate of up to 2.7 percent for a 15-year mortgage, by the end of the month. Nadia Evangelou, the senior economist and director of forecasting for the National Association of Realtors, is firmly in McBride’s camp.
He foresees the 30-year fixed rate clocking in as high as 3.5 percent, on average, compared to an average rate of up to 2.7 percent for a 15-year mortgage, by the end of the month. Nadia Evangelou, the senior economist and director of forecasting for the National Association of Realtors, is firmly in McBride’s camp.
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“Inflation has risen to its highest point since 1990. If it remains elevated for a longer period, that will drift up mortgage rates even higher,” she says. “Meanwhile, the Fed will slowly reduce its monthly bond purchases.
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This strategy is expected to move up bond yields, as the supply of these bonds will increase in the broader economy and bond prices will drop. Following the trend of the 10-year Treasury yield, mortgage rates will go up as well.” Len Kiefer, deputy chief economist for mortgage giant Freddie Mac, says his organization also expects elevated rates this month, but perhaps not quite as high as others anticipate.
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“We forecast that the 30-year fixed mortgage will be around 3.2 percent in December. This forecast implies that rates will be headed higher in the near term,” says Kiefer.
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“Mortgage rates generally follow U.S. Treasury yields, and we expect that these will continue to increase – although at a modest pace. Treasury yields are higher due to a variety of factors, including a recovering economy, higher short-term inflation, and anticipated tightening of monetary policy.” While Freddie Mac doesn’t forecast the 15-year mortgage rate, Kiefer says you can expect this shorter-term mortgage to follow the same trends as its 30-year counterpart.
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Ringing in rate projections for 2022
Eager to learn if higher December rates are just a fluke? Brace yourself for bad news: Several factors point to further rate jumps in the first quarter of 2022.
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“Mortgage rates will continue to rise in the year ahead due to elevated inflation. When inflation increases, lenders demand higher interest rates as compensation for the decrease in purchasing power,” Evangelou says. “Also, consider that the job market continues to recover.
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Mortgage rates tend to rise when employment grows and the unemployment rate falls.” Consider, too, that the Fed’s own projections indicate a likely interest rate increase or two in 2022. But if inflation continues to grow at its present pace, this rate hike may come sooner than expected next year.
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“And when the Fed increases its interest rates, banks do, too. When that happens, mortgage rates go up for borrowers,” adds Evangelou, who believes the 30-year mortgage and 15-year mortgage will average 3.5 percent and 2.8 percent across 2022. McBride says the uptrend in rates will be limited, however, by occasional bouts of market volatility and worries about slower economic growth in 2022.
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“Nevertheless, continued economic expansion, elevated inflation, and a less stimulative Federal Reserve are all suggestive of higher, rather than lower, mortgage rates in the year ahead,” says McBride, who predicts rates respectively inching up to 3.6 percent and 2.8 percent for the 30-year and 15-year mortgage loan, on average, by the end of March 2022. “If the perception is that the Fed is behind the inflation curve, this will fuel an uptick in rates.” If Kiefer’s calculation that the 30-year rate will average 3.4 percent in the first three months of 2022 proves correct, that means rates will have reached their highest level since the pandemic hit in spring 2020. “The good news is that higher interest rates will reflect a stronger economy that continues to recover and return toward normalcy,” says Kiefer.
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“Of course, negative surprises on the pandemic could lead to lower interest rates, but continued progress on COVID-19 would likely yield higher rates. The market has so far shrugged off high recent inflation readings, interpreting much of the higher recent inflation to be transitory; but if market participants begin to view inflation as more persistent, that could result in higher rates.” Our panel of pros isn’t alone in their prognoses for costlier mortgage loans next year.
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In its, Fannie Mae anticipates the benchmark 30-year fixed-rate mortgage to average 3.2 percent in the first quarter of 2022 and 3.3 percent throughout the entire year. The Mortgage Bankers Association averaging 3.3 percent in the first quarter and 4.0 percent for the full year of 2022. And according to Selma Hepp, deputy chief economist for CoreLogic, the 30-year fixed rate should hover around 3.4 percent by the end of 2022.
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Gift yourself a home or refi now if you re ready
Purchasing a home is a major commitment that no one should rush into. But in today’s hot market, home buyers may need to move decisively after carefully considering their financial situation.
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“With mortgage interest rates and house prices forecasted to increase over the next year, purchasing today will likely be more affordable than waiting,” suggests Kiefer. “Prospective buyers will want to consider their current credit profile and household balance sheet first, as well as how long they plan to stay in their new home, what their current employment situation is, how much other debt they have to service, and how well they have been able to manage their payments on existing debt obligations.” Evangelou agrees. “It makes sense to wait only if mortgage rates or home prices are going to fall, which isn’t likely going to happen in the year ahead,” she says.
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“Meanwhile, rent prices have increased, and they may rise even further as demand for rental homes gets stronger. Thus, I advise potential buyers to lock in a rate now.” If refinancing is on your radar, now is the time to act, assuming your financial house is in order, McBride advises.
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“Even with the recent rate increases, refinance rates are still lower than anything seen before the summer of last year,” he says. “Don’t let the opportunity pass you by.
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Particularly with the cost of so many other things on the rise, the ability to trim your mortgage payments in a meaningful way can create valuable breathing room in your household budget.” Don’t let the prospect of a more expensive rate environment spoil your holiday cheer. “By historical standards, mortgage interest rates remain super low,” Kiefer explains.
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“Rates would have to increase by nearly 2 full percentage points to match the highest they’ve been in just the past five years.”
Learn more
SHARE: Erik J. Martin is a Chicago area-based freelance writer/editor whose articles have been featured in AARP The Magazine, Reader's Digest, The Costco Connection, The Motley Fool and other publications. He often writes on topics related to real estate, business, technology, health care, insurance and entertainment.
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Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal.
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