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Here’s exactly what economists and analysts think will happen to mortgage interest rates in the coming year

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Mortgage rates have been historically low for quite some time — some 15-year rates are near 2% and some 30-year rates are below 3%, as you can see here — and with a new year upon us, some are wondering what that may mean for homebuyers. Fannie Mae predicts that mortgage rates will climb to an average of 3.4% for a 30-year fixed rate loan next year, Freddie Mac comes in at 3.5% in its October quarterly forecast, and the Mortgage Banker’s Association predicts a rise in rates to 4% by the end of 2022.

Many of the pros we spoke to said the same. “I expect mortgage rates to slowly rise to 3.6% by the end of 2022,” says Daryl Fairweather, Redfin chief economist. “The Fed is tapering mortgage backed security purchases and we will feel the effects in mortgage rates.” What’s more, “inflation, accompanying a stubbornly recovering economy, is pressing upward on mortgage rates. The remedy — a stricter monetary policy — will cause mortgage rates to rise, too,” predicts Holden Lewis, home and mortgage expert at NerdWallet.  

For his part, Greg McBride, chief financial analyst at Bankrate, notes that come 2022, the general trend will be toward higher rates as economic growth continues, inflation remains stubbornly high and the Fed is less accommodative. “But there will be ups and downs along the way as concerns about slower economic growth creep in. Or, as Kate Wood, home and mortgage expert at NerdWallet, simply puts it: “Don’t expect rates to dip.”

What do potentially rising rates mean for potential homebuyers?

“Bear in mind that while rates might not be at historic lows, mortgage rates are still plenty low. And an interest rate that’s 3.5% or even 4% will be an easier pill to swallow if other aspects of the housing market, like inventory or pricing become more buyer-friendly,” says Wood. Furthermore, McBride says mortgage rates won’t actually be the problem next year. “Whether you can find a place to buy and the price you’ll pay for it will continue to be the major obstacles for home buyers,” says McBride.

That said, experts say that while housing prices will rise, the pace won’t be as frenetic as it was this past year. “Monthly home value growth has slowed from its record-breaking pace this summer, inventory is up for the fourth month in a row and more sellers are cutting their list price. This all points to less competition for home shoppers, but make no mistake, the housing market remains clearly tilted in favor of sellers,” Zillow senior economist Jeff Tucker told MarketWatch Picks

All that said, experts noted that rather than try to time interest rates and home prices, aspiring homebuyers should look at their own personal situation. “They should focus on personal life circumstances and how long they think they’ll be in the area,” Fannie Mae’s deputy chief economist Mark Palim told MarketWatch Picks, adding that if you plan to be in that home for five years or more, buying may make sense.

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