What a difference a year makes. Back in late April 2021, the 30-year mortgage rate averaged around 3.14 percent. Fast forward to today and rates have jumped significantly, averaging 5.22 percent as of late April, per Bankrate data.

Just a month ago, rates were still below 5 percent.

The continued war in Ukraine, persistent inflationary pressures and a rocky stock market are certainly contributing factors.

It’s only fair to ask: How high will mortgage rates climb in the near term? What about the long term? Are we in a housing bubble? What does the future hold for real estate and the financing of it?

We consulted with several pros on the possible trends emerging in the days and weeks to come.

Expect to pay more in May

This should be the peak of the homebuying season, now that outdoor temps are rising — a time when house shoppers are typically more motivated to tour properties and commit to a purchase. But costlier mortgage rates are making many think twice, and that collective doubt could snowball, especially if rate prognostications for May are accurate.

“With inflation still accelerating and the Federal Reserve on the cusp of starting to run off their bond portfolio, all signs point to higher rates,” Greg McBride, CFA, chief financial analyst for Bankrate, says. “In May, the benchmark 30-year fixed mortgage rate will be between 5.5 percent and 5.75 percent for the first time since 2009, and even 15-year fixed rates will climb to around 4.75 percent to 5 percent.”

Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors, doesn’t deviate much from that prediction. Evangelou anticipates 30-year and 15-year fixed mortgage rates to average 5.2 percent versus 4.5 percent, respectively, this month.

John Thomas, partner at Cassin & Cassin LLP, a New York City-based firm that specializes in real estate and keeps a close tab on the mortgage, housing and financial markets, is slightly more pessimistic about benchmark rates over the next few weeks.

“Many economists forecast another rate hike of 50 to 75 basis points in June to aggressively combat inflation. That’s why I foresee that the 30-year fixed-rate mortgage could easily rise to between 5.75 percent and 6 percent by the end of May,” Thomas says.

Halftime adjustments

With Independence Day not far off, we’re close to the midway point of the ball game that is 2022. That’s as good a time as any to calibrate the winds of change expected in the mortgage market. So where do our rate wizards believe mortgages will head over the next two months? Prepare to crane your neck skyward.

“Mortgage rates will continue their upward trek,” Evangelou says. “As inflation will remain elevated for the next several months, the Fed will continue its tightening monetary policy through a series of interest rate hikes and by reducing its balance sheet. Thus, the 30-year fixed mortgage rate may reach 6.0 percent by the end of the first half of this year.”

Thomas thinks that projection might underestimate the confluence of powerful market forces at work.

“The 30-year fixed-rate mortgage could rise to 6.5 percent by mid-year. This would put the 15-year fixed-rate mortgage at about 5.5 percent at the end of June,” Thomas says.

McBride sees a bit of a silver lining ahead, however.

“It will take the cumulative effect of a few Fed interest rate hikes before we see any tempering of inflation pressures. But once that happens, mortgage rates will likely have peaked,” McBride says. “It is unclear if that will happen by mid-year, though half-point Fed rate hikes will be a step in the right direction. Inflation remains the hub on the wheel. Unless and until we have at least a hope of inflation reversing, the upward pressure on mortgage rates is likely to persist.”

Evangelou expects that housing demand should inevitably cool as rising mortgage rates continue to dampen affordability.

“Slower housing demand can keep mortgage rates lower. Nevertheless, due to seasonality in the real estate market, this will likely happen in the second half of the year,” Evangelou says.

Bubble trouble?

Robert Heck, vice president of Mortgage for Morty, an online mortgage marketplace headquartered in New York City, doesn’t believe we are in a housing bubble ready to burst.

“Supply versus demand is significantly different than in the 2000s, a time that led up to the housing crisis. Inventory remains slow due to supply chain issues and persistent demand. As long as inventory is low and total units remain near current levels, home prices should remain stable,” Heck says. “Looking at home price appreciation over the last 20 years relative to other gains in major asset classes like stocks, housing is not in an obvious bubble relative to historical standards.”

Nevertheless, Heck says any solvency crisis could result in a spike in mortgage defaults, which may cause weakness in the housing market — “but I don’t believe that housing will be the leading driver of the next recession or asset/credit bubble.”

Weigh mortgage options carefully and consider alternatives

Prospective mortgage borrowers face a sticky wicket: Wait things out in the hope that rates and home prices will fall, or claim something you can afford now to avoid paying even more months down the road?

McBride is clear on his advice.

“There is no clear benefit to waiting at this point,” explains McBride. “But don’t stretch to buy more than you can truly afford because of fear of missing out. Prices are very elevated right now, and the more you pay now, the longer you’ll need to stay in the home to recoup transaction costs and build any portable equity.”

Thomas also advocates for carpe-diem thinking if you’re in a healthy financial and employment position.

“For those considering a home purchase or refinance, acting quickly would probably be the best strategy since there appears to be no end in sight for mortgage rate increases and home price increases,” Thomas says.

Evangelou points out that, while today’s average monthly mortgage payment is higher by $500 than it was a year ago, “on a historical level, rates still aren’t as high as they used to be. For instance, in 2002, the average mortgage rate was about 7 percent.”

One increasingly enticing option for those seeking financing is to pursue an adjustable-rate mortgage (ARM), in which the mortgage rate stays the same for a fixed period (usually the first five, seven or 10 years), after which time the rate can adjust upward.

“Those who plan to sell or refinance before the end of the fixed-rate introductory period should think about taking an ARM,” Evangelou says.

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