Freddie Mac Projects Low Average Mortgage Rate for 2022

Will mortgage rates stay competitive next year? One expert source says the answer is yes.

Many prospective home buyers have been struggling in today's real estate market for a number of reasons. Not only is inventory extremely limited, making it difficult to find a suitable home, but property values have soared over the past year. That's causing a lot of buyers to get priced out of neighborhoods they would normally be in a good position to afford.

The reason home prices are so high boils down to an increase in demand. Many buyers want to purchase a home this year to take advantage of current mortgage rates, which, historically speaking, are very low.

But here's some good news for home buyers who may be thinking of putting their house-hunting plans on hold. Freddie Mac now projects that the average mortgage rate for a 30-year fixed loan will be 3.7% in 2022. And while that's a bit higher than the average rate right now, it's still a very competitive rate to lock in.

Should you delay your home-buying plans until 2022?

Right now, there's just not a large enough supply of available homes to meet buyer demand, and that's resulting in higher prices. Many listed homes today are winding up in bidding wars, where two or more buyers go head to head in an effort to come up with the highest offer. And that's leaving buyers on a budget out in the cold.

However, a big reason to forge ahead with your home search today is to take advantage of super low mortgage rates. But if rates stay competitive next year, then 2022 could be a better time to buy. At that point, we could see a lot more inventory hit the real estate market, and once that happens, prices could start to come down.

As of this writing, the average 30-year mortgage rate is 3.105%, which is in line with what Freddie Mac projects as the average rate for all of 2021. If you were to take out a 30-year, $300,000 mortgage at 3.105%, your monthly payment would be $1,282 for principal and interest on your loan. (Note that your $1,282 doesn't include outside costs like property taxes and homeowners insurance.)

Now, say you were to wait until next year to buy a home, when the interest rate might be 3.7% on the same loan amount with the same term. In that case, your monthly principal and interest payment would be $1,380. That's more money on a monthly basis. But if home prices come down a lot next year, you may be able to get a lot more house for that $300,000 mortgage. Or, you might get away with borrowing less.

And if home prices decrease enough so that you could knock your mortgage down to $250,000 at 3.7% over 30 years, your monthly principal and interest payment would be $1,150. That means you'd save money, even with a higher interest rate on your mortgage.

That said, just because Freddie Mac anticipates that the average 30-year loan next year will sit at 3.7%, that doesn't mean it's guaranteed. But what it does mean is that if you're getting frustrated with your home search, it could be time to put it on pause and try again in 2022. Chances are, you'll still have plenty of opportunity to snag some mortgage savings, and you may even score a much better deal on a home, too.