Should You Rush to Get a Mortgage Now That Rates Are Climbing?

Four adults, including one using a wheelchair, gasp in delight at their new home surrounded by moving boxes.

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Mortgage rates have been rising. Should you get moving on your home loan application?

Key points

  • Mortgage rates have been higher to start off 2022.
  • Climbing rates could put homeownership out of reach for many buyers this year.

It's fair to say that 2021 was a notably tough year to buy a home. While mortgage rates sat at competitive levels from the start of the year through the end of it, home prices were extremely inflated during that same 12-month time frame. And for many buyers, rates weren't low enough to offset record-high home prices.

It's too soon to know how home prices will trend this year, but they're starting off high. That's largely due to a limited supply of inventory.

At the same time, though, mortgage rates have already risen quite a bit this year, and as of early February, the average 30-year loan is sitting at close to 3.8%. While that's a good rate from a historical standpoint, it's notably higher than where rates sat at any point in 2021.

If you were hoping to buy a home at some point in 2022, you may now be worried that waiting will leave you with a higher mortgage rate to get stuck with. But should that fear drive you to apply for a mortgage right away?

Don't rush a major decision

If you're in a strong position to buy a home right now -- you have a steady job, great credit, minimal debt, and a solid down payment -- then there's no reason not to make an offer if you see a suitable home. But if you're not quite ready to purchase a home, you shouldn't let your fear of rising mortgage rates push you to jump right in.

It may be the case that you want to save an extra $3,000 or so before buying a home -- both to cover your moving costs and have some leeway in case you need to make repairs early on. Or maybe you're about $5,000 shy of the down payment you're hoping to make, and you need time to boost your savings. While it's understandable you'd want to lock in a mortgage before rates climb further, it's also not worth putting yourself in a tough financial spot to shave a marginal amount of money off your mortgage.

Though rates may indeed continue to climb in 2022, they're unlikely to jump drastically from one month to the next. Say you decide to hold off on buying a home for a few months. Let's also assume that instead of locking in a 30-year, $200,000 fixed mortgage at 3.8%, you wind up doing so at 4%. In that case, you're looking at spending an extra $22 a month for principal and interest on your mortgage. While that's not zero, it's also not a life-changing sum.

It pays to wait

Buying a home is a major undertaking -- one you need to be ready for financially. If you're prepared to buy right now, then you might as well move forward before rates climb further. But if that's not the case, don't sweat it.

Waiting to buy won't necessarily mean dooming yourself to a much higher mortgage payment for life. Besides, there's always the chance rates could drop back down a bit at some point in 2022, and so waiting on a mortgage may not hurt you financially after all.

Our Research Expert