Interest rates expected to rise in January, expert says

The housing market is predicted to remain strong over the next year but interest rates could begin to increase in January.  (iStock)

Interest rates are near record lows but could begin to increase as soon as this month, according to a housing expert. 

Today’s average 30-year mortgage rate rests at just over 3%, according to the latest data from Freddie Mac. But expected market conditions for the year could cause it to move up. 

"Like 2021, 2022 will continue to be driven by strong growth, persistent inflation pressures, and a robust consumer, and despite the unexpected pivot toward liftoff, financial conditions will remain extraordinarily accommodative," Sam Dunlap, Angel Oak Capital Advisors chief investment officer of public strategies, said. "We believe this environment should send long-term interest rates higher beginning in January as market participants price in more Fed tightening in the future but recognize how easy financial conditions remain, reinvigorating the bear steepening trend witnessed in the first half of 2021."

If you want to take advantage of low mortgage rates before they begin to rise, consider taking out a mortgage refinance to help you save money. Visit Credible to find your personalized rate without affecting your credit score.

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Home price growth to remain strong in 2022

In January and throughout this year, home price growth is expected to remain strong, Dunlap said. However, it'll likely be lower than the home price surges in 2021 amid the COVID-19 pandemic.

"Home price appreciation (HPA) shattered expectations in 2021, and our expectation is there is more room to run in 2022 due to the chronic supply-and-demand shortage, historically low mortgage rates, and improving wages due to a robust labor market," Dunlap said. "While we don’t expect the 19% YoY increase in HPA witnessed in 2021 to continue in 2022, we do expect another year of potentially 10% YoY appreciation in 2022 as the favorable fundamentals driving the historic ascent remain in place. 

"We expect January’s reading will confirm moderation in the pace of HPA, but simply put, there is far more demand for single-family shelter than there is supply," he continued.

And as home prices continue to surge, Dunlap said that homeowners should consider refinancing their mortgage to pull cash out of their home before interest rates begin to increase. 

"Given the vast amount of home equity creation in the last couple of years, homeowners should consider cash-out refinancing early [in 2022] while rates are still historically attractive to potentially consolidate debt," he said. 

If you are interested in a cash-out refinance amid today's low mortgage rates and last year's price gains, visit Credible to compare multiple lenders at once and choose the one with the best rate for you.

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Potential monetary policy changes from Fed won’t deter housing

At its latest December meeting, the Federal Reserve announced it is doubling its taper rate, and is now looking at up to three rate hikes in 2022. But despite this movement, the housing market is still expected to remain strong as high demand continues amid low inventory, Dunlap said. 

"Despite our expectation for rising long-term interest rates in 2022, we do expect mortgage rates will remain historically attractive, and recent Fed actions will not be disruptive to housing in the near term," he said. "Low mortgage rates, rising wages and robust demand for single family shelter should continue to bolster housing in 2022."

If you are interested in taking advantage of mortgage rates while they remain low, contact Credible to speak to a home loan expert and get all of your questions answered.

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