The last two years brought many unexpected changes to Dallas-Fort Worth’s housing market. Spurred by the economic fallout from the COVID-19 pandemic, mortgage rates reached significant lows in 2021. But many wonder how long this will hold.
With housing prices skyrocketing through last year, the – mortgage rate forecast for 2022 hinges on several factors. Here, we’ll look at a couple of those and get a feel for how they’ll play out.
How Are Mortgage Rates Determined?
Several factors determine mortgage rates in America. Inflation, economic health, down payment amount, and loan terms are the main considerations. Some of these you can control and some you cannot.
For instance, offering a larger down payment and choosing a 15-year mortgage over 30-year mortgage locks in lower rates. And while we can’t control the economy, the Federal Reserve holds some sway in a couple of ways on our behalf.
The Fed’s Impact on Mortgage Rates in 2022
The Federal Reserve directly dictates the prime rate and influences mortgage rates through the bond market. With the economic stagnation ushered in by the early days of the COVID-19 pandemic, the Fed lowered prime rates and bought more bonds. This was in service of stimulating real estate purchases, which led to a red-hot market in 2022. Recently, they announced a tapering of mortgage-backed securities purchases, causing an expected rise in rates through 2022.
What This Means for The DFW Market
Kathleen Hays, Senior Loan Officer at Crosscountry Mortgage in Dallas, tracks the impact of the Fed regularly. In terms of mortgage rates, she sees market trends that spell higher rates through the end of this year.
“There’s a combination of several factors affecting rates,” Hays says. “Of course, there’s the natural market correction after a very odd couple of years, but the Fed and inflation are also going to have an influence on this.”
Her prediction is a steady increase in the coming weeks.
“I think we’re going to see it rise a couple of points a week,” Hays says. “Then I think we’ll hover around the 4 percent range for the rest of 2022.”
While this is slightly higher than the record rates from 2021 and 2020, 4 percent is still pretty solid.
“We say anything below 10 percent is great, anything below 5 percent is fabulous,” says Hays.
