
With all the buzz about mortgage rates and the trend upward, let’s take a look at one of the industry gold standards for recording real time interest rates borrowers are closing with these days. This data is from Freddie Mac who surveys conventional conforming purchase loans for borrowers who put 20% down and have excellent credit. The weekly rates and fees associated with the rates are the average of the loans surveyed.
Freddie Mac 2022 Primary Mortgage Market Survey Summary Page with all rate types- U.S. averages.

This is by far one of the most extreme and severe shifts in the past 3.5 months I’ve seen. And having worked the past 16 years through the mortgage meltdown and pandemic health crisis, that’s saying a lot! But let’s put things in perspective.
The only reason rates have been artificially low during these disruptive periods is due to the Federal Reserve pouring money into mortgage bonds... because the investment community was not. Had the Fed not done so, and the mortgage investor dynamics continued unabated, we would be having a completely different discussion. The Fed’s moves were critical and required to survive at that time, but exiting the monetary support is always messy. That’s what is happening now. The Fed is deliberately removing this monetary support to slow down the inflationary pressures overall. The Housing Market is certainly in their cross hairs.
I try to encourage new home buyers to stop looking in the rearview mirror about rates. Yes this has affected affordability for many. We should still focus on the forward question: is renting better than buying? Are rates going to go back to the 3’s?
Sorry to say, unlikely unless there’s another huge disruptive event. But let’s not count on that. Rates are likely to be in the 5 – 6 range and that’s where affordability is going to be. That same Freddie Mac survey of rates on their website goes back to the 70's. Take a look at rates in the early 2000's before the Great Recession that started in 2007. The average mortgage interest rate was between 5.75 and 6.5% for years. https://www.freddiemac.com/pmms
My advice to home buyers looking in this highly competitive market are:
As demand slows down due to rates and housing prices, sellers are not going to continue to ask for the moon. It’s already happening. Sellers are going to see less aggressive offers over and above asking price because there will be fewer of them.
Appreciation is still your friend…. prices may slow down the rapid climb higher, but they are unlikely (in general) to depreciate. The demographics tell us demand will remain to outpace supply, although at a slower pace, but annual appreciation of 5% is not unrealistic. A $400,000 house today will likely be $420,000 next year. If you are the owner, you love the $20,000 increase in equity. If you are a buyer, you are wishing you bought last year.
Although cash is more prevalent in the marketplace than prior years (up to about 20% of the buyer market when it’s usually in single digits), financed buyers are still the majority. And everyone else is not putting 20% down. There are low down payment programs available with the same underwriting qualifications as the 20% down buyer – the qualifying parameters are basically the same for both Buyers. It does make the appraised value more sensitive on the lower down payment buyers, but I see many contracts today with an appraisal gap clause so everyone knows going in what Option B is if the property does not appraise. Realtors have pivoted to this feature in a contracts to address the concerns over low appraisals when bidding over asking price.
Renters are getting squeezed and pushed into the purchase market. Landlords have a similar imbalance between supply of rentals and renter demand, so renewals are coming in with higher rent increases than when the market is balanced. With a fixed rate mortgage, you have more control over any annual increases.
The market will continue to move forward, Buyers and sellers will continue to close on their homes. It’s a matter of being prepared and educated about the market, your financing options with accuracy, and a true commitment to persevere through these challenging conditions. Its’ worth the effort.
As always, feel free to reach out to discuss any of this information or your housing financial options!
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