Buyers Are Clamoring for Mortgages as Rates Rise

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

KEY POINTS

  • Purchase mortgage volume rose 8% last week compared to the previous week.
  • With mortgage rates rising, it's easy to see why buyers may be rushing to lock in a home loan.

Mortgage volume is up, and there's a good reason why.

During the latter part of 2021, mortgage demand slumped as rates increased. But while mortgage rates have continued to climb during the early part of 2022, buyers haven't backed away. Instead, mortgage applications for new home purchases rose 8% last week compared to the week prior, according to the Mortgage Bankers Association. If rates continue to climb, mortgage lenders may find themselves quite inundated with loan applications over the next few months.

Are mortgage rates still competitive?

The rates we've seen over the past few weeks are higher than they were at any point in 2021. Despite that, mortgage rates are still quite competitive from a historical standpoint. Home loan applicants with strong credit scores are still likely to snag attractive rates on mortgages right now.

But will mortgage rates continue to climb? It's looking likely. Though rates may not rise drastically between now and the end of the year, there are certain factors driving them up. A big one is the Federal Reserve's plan to raise its interest rates.

Though the Fed doesn't set mortgage rates (or any consumer interest rates), it can influence them. While the average 30-year fixed mortgage is, as of this writing, sitting at almost 3.7%, it wouldn't be shocking to see the 30-year loan hit 4% before 2022 comes to an end.

Should you rush to lock in a mortgage?

If you're actively searching for a home and are serious about buying in the near term, then it could pay to apply for a mortgage sooner rather than later. But otherwise, you may want to hold off until your buying plans become more concrete.

When you lock in a mortgage, that rate isn't guaranteed indefinitely. Usually, after 30 to 60 days, your rate will expire. And while there's the option to pay a fee to extend your rate lock, that fee may not be worth it.

Instead of rushing to get a mortgage when you've barely started a home search, focus instead on finding the right home while keeping tabs on mortgage rate movement. If you see rates start to climb drastically, you can, at that point, consider locking in a rate. But the upward movement in mortgage rates we've seen so far this year has been gradual, so there's no need to panic that rates will jump from their current level to upwards of 4% overnight.

At the same, though, it pays to work on boosting your credit score if it could use some work. The higher that number is, the lower the rate you're likely to qualify for.

Generally speaking, getting your credit score into the upper 700s or higher will help ensure you're eligible for the best mortgage rate any given lender has to offer. If your score needs a boost, make a point of submitting all bill payments on time and paying off lingering credit card balances. Checking your credit report for errors -- and correcting those that work against you -- is another good way to improve your credit score.

Though mortgage rates may be climbing, and they may have inspired a substantial uptick in home loan applications last week, it's still a great time to purchase a home from a mortgage rate perspective. And while the current housing market is a challenging one due to high home prices and low inventory, you shouldn't let today's mortgage rates discourage you from moving forward with your plans to buy.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

Our Research Expert

Related Articles

View All Articles Learn More Link Arrow