Should you rush to get a mortgage now that rates are climbing?

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Mortgage rates have gone up. Should you move on your mortgage application?


Key points

  • Mortgage rates were higher to start 2022.
  • Rising rates could put home ownership out of reach for many buyers this year.

It’s fair to say that 2021 has been a particularly tough year for buying a home. While mortgage rates remained at competitive levels from the beginning to the end of the year, house prices were extremely inflated during this same 12-month period. And for many buyers, rates weren’t low enough to offset record home prices.

It is too early to know how house prices will evolve this year, but they are starting to rise. This is largely due to limited stock.

At the same time, however, mortgage rates have already risen significantly this year, and at the start of February the average 30-year loan stood at almost 3.8%. While this is a good rate from a historical perspective, it is significantly higher than where rates have been sitting at any time in 2021.

If you were hoping to buy a home sometime in 2022, you may be worried now that the wait will leave you with a higher mortgage rate. But should that fear drive you to apply for a mortgage right away?

Don’t rush an important decision

If you’re in a good position to buy a home right now – you have a stable job, good credit, minimal debt and a solid down payment – then there’s no reason not to make an offer if you see a decent house and get a loan with no credit checks. But if you’re not quite ready to buy a home, you shouldn’t let your fear of rising mortgage rates push you.

You may want to save around $3,000 more before buying a home, both to cover your moving costs and to have some leeway in case you need to make repairs early. Or maybe you’re about $5,000 short of the down payment you’re hoping to make and need time to build your savings. While it’s understandable that you want to lock in a mortgage before rates go up any further, it’s also not worth putting yourself in financial trouble to save a marginal amount of money on your mortgage.

While rates may indeed continue to climb in 2022, they are unlikely to jump drastically from month to month. Let’s say you decide to put off buying a house for a few months. Also suppose that instead of locking in a $200,000 30-year fixed mortgage at 3.8%, you end up locking in at 4%. In this case, you’re looking at spending an extra $22 per month on your mortgage principal and interest. While it’s not zero, it’s not a life-changing sum either.

It pays to wait

Buying a home is a major undertaking – one that you need to be financially ready for. If you’re ready to buy now, you might as well go ahead before rates rise further. But if not, don’t worry.

Waiting to buy won’t necessarily mean committing yourself to a much higher mortgage payment for life. Also, there’s always the chance that rates will drop a bit at some point in 2022, so waiting for a mortgage might not hurt you financially after all.

A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage

Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.

Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.

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