Rising Interest Rates in 2022: Is It Too Late to Buy or Refinance?

We’re now coming up on the two-year anniversary of the coronavirus (COVID-19) pandemic impacting us here in the United States. While it has been a tumultuous time for many of us in our own personal lives, the global and national economies were on rollercoaster rides of their own. One of the big impacts was on interest rates -- most of us heard in 2021 how interest rates were at historic lows.

But with the arrival of the new year, interest rates are beginning to rise once again. If you weren’t able to take advantage of the low rates, does it mean it’s too late for you? What if you’re looking to buy or refinance this year? 

Keep reading to learn more about historic interest rates, 2022’s rates, and what it means for you.

A Historical Look at Interest Rates

In February 2022, the average interest rate for a 30-year fixed mortgage has been near 4%. In 2021, the average was 2.96% for the year. This could be enough to scare away some potential homebuyers or homeowners who are considering refinancing. Let’s look at the historical rates over the past four decades.

As you can see, when looking at the past four decades, even a mortgage rate near 4% would be the 7th-lowest rate since 1980. While it may not be the lowest of all time, for many people, it may not be a large enough difference from last year’s lows to put them off entirely from their home buying or refinancing plans.

Putting 2022 into Context

Of course, it is only the beginning of the year. While interest rates are under 4% for now, there’s no guarantee they will stay that way throughout the rest of the year. But should you be worried about 2022’s interest rates? And what about rising home values?

It’s true that home values have risen -- in some cases, exponentially -- over the past couple of years. But let’s look at 2022’s home prices compared to those in the 1980s and 1990s. While homes may have been less expensive decades ago, for many people, it may be cheaper to buy a home now than it was back then.

Consider the average income compared to the price of a home. In 1981, for example, the average household income was $22,390, or $1,856 per month. The average monthly mortgage payment in 1981 was $1,558.58, or 84% of the household income, with interest rates as high as 18.63% that year.

In 2021, on the other hand, the average household income was $79,900, or $6,658 per month. The average mortgage payment was $1,100, or 17% of the household income.

While property values may be at an all-time high, it doesn’t necessarily mean that the cost of buying a home is at an all-time high -- regardless of the increasing interest rates.

Is It Too Late to Buy a Home or Refinance?

If you’re looking to buy a new home or refinance your mortgage on your existing one, the truth is that it’s not too late. However, as no one can say for sure what the interest rates are going to do throughout the rest of the year, it’s best to get started with the process as early as you can. That way, you can avoid the rates increasing too much more than they already have. And it means you can save as much money as possible.

As a review, refinancing can help you lower the interest rate you have on your existing mortgage by replacing it with a brand new one. You can also renegotiate the life of the loan or obtain terms that are more favorable to you as the borrower. In this case, you may opt for a “rate-and-term” refinance.

On the other hand, if you’re more interested in getting cash back to make home improvements, take a vacation, or pay off debt, you might want to consider a “cash-out” refinance. 

Academy Bank Offers Convenient Mortgage Options*

Whether you’re considering buying or refinancing, Academy Bank offers convenient options for you.

If you’re a homebuyer, we offer: 

  • FHA Loans: A loan designed for first-time homebuyers and step-up borrowers
  • VA Loans: A loan offered exclusively to military service members, both active and retired
  • Conventional Loans: Fixed and adjustable-rate mortgages available
  • Jumbo Loans: For mortgages with a loan amount that exceeds $548,520
  • Hero Loans: A loan with $0 down payment offered exclusively to first responders

For those looking to refinance, we offer:

  • Dedicated loan advisor to help you every step of the way. 
  • Fixed and adjustable interest rates available. Learn about the differences here.
  • Competitive rates and flexible terms
  • Cash out options available
  • Options available to tailor your mortgage to your specific situation
  • Fast approvals

Whether you’re looking for a home loan or want to refinance, our loan advisors can help you through the entire process. Get in touch with one of them today.

And don’t forget to capitalize on those low interest rates before they increase.

Your Partner in Finance

No matter where your financial journey takes you, Academy Bank is here for you. We offer convenient options to help our clients stay in control of their finances with dedicated experts by their sides.

Learn more about our mortgage options*. 

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* Subject to credit approval

February 23, 2022 | Posted in: Home Mortgage