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Will Texas Mortgage Interest Rates Drop This Year? Forecasting Rates in 2022

August 8, 2022 | By David Webber
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It's no secret that Texas has been on a hot streak when it comes to the housing market. Home prices have been steadily increasing, and demand is high. But what about mortgage interest rates? Will they drop this year? Or will they continue to rise?

If you're currently in the market for a home, then you certainly want as much information as you can get - and fast! That's why we're covering the current state of the Texas housing market, as well as some news about Texas mortgage interest rates and lending. We'll also do some forecasting and try to help you gauge if it's the right time to buy a house in Texas - or wait? Stay tuned for some key takeaways!

A look at the current Texas housing market

The Texas housing market has been on fire for the past few years. Home prices have steadily increased, and there's no sign of slowing down. In fact, according to the National Association of Realtors (NAR), the median home price in Texas is expected to continue to increase in 2022. Recent data released show that the median existing-home sales price home sales price rose 18.6% in the first quarter of 2022!

Furthermore, demand for homes is also high. Housing inventory levels are low, and there are more buyers than there are homes available. This means that if you're thinking of selling your house, this is a great time to do it.

Tracking interest rates in 2022

Now let's take a look at mortgage interest rates. According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage in Texas is currently about 5.61 percent. It is slightly lower for FHA and VA loans.

Although rates have climbed in the past year, this is still relatively low, especially when you compare it to historical averages. In fact, the average rate for a 30-year fixed-rate mortgage in Texas since 1971 is about 7.77 percent - much higher than current mortgage rates. So if you're thinking of buying a house this year, now might be a good time to do it.

News from the Mortgage Bankers Association

The Mortgage Bankers Association (MBA) is a trade association that represents the interests of the mortgage banking industry. Recently, they released their mortgage interest rates forecast for 2022.

According to the MBA, while they expect the average rate for a 30-year fixed-rate mortgage to rise this year, they don't expect much of a cooling effect on the market. In fact, even with rising mortgage rates, the MBA anticipates we will see a larger rebound in homebuying in 2023 and 2024.

Forecasting mortgage rates in 2022

Now let's do some forecasting of our own. When we look at the current state of the Texas housing market, as well as the news from the MBA, we can expect that interest rates will rise slightly in 2022. 

However, the worst may already be behind us. For reference, mortgage interest rates have risen nearly three percent since last year. While inflation will continue to be a factor before we see rates drop significantly again, we will likely see a slower rate of change overall.

There are a few factors that could impact this forecast. 

Impact factors

Many factors impact interest rates, including inflation, world events, economic crises, and the Federal Reserve.

Specifically, the Federal Reserve sets a target range for the federal funds rate (the rate at which banks lend money to each other overnight). This target range was already raised earlier this year.

The federal funds rate impacts short-term interest rates, which in turn affects mortgage rates. So when the Fed raises or lowers the federal funds rate, we can expect mortgage rates to follow suit.

In addition, inflation also plays a role in setting mortgage rates. When inflation is high, as it is now, mortgage rates tend to be higher as well. Inflation rates have been rising these past few years, with no clear sign that will change. 

What the Fed is doing about it

As we mentioned earlier, the Federal Reserve sets a target range for the federal funds rate. Currently, this target range is set at 0.25-0.50%.

Economists have predicted a 0.75 point hike this summer, with potential subsequent increases. This could bring the interest rates to a range of 3.25% to 3.5% by the end of 2022. 

So is it time to buy - or wait?

Let’s get down to our original question: is it time to buy a house in Texas - or wait?

If you're thinking of buying a house in Texas, now might be a good time to do it. Interest rates are still relatively low, and prices are expected to continue to rise. However, if you're not ready to buy just yet, that's okay!

You can always wait and see how the market develops over the next few months. And if your budget is tight, it may make better fiscal sense to continue to wait and save instead of making an impulsive decision now out of fear of rising interest rates. 

But if you're already set on buying a house in Texas this year, and you already have your finances and plans in order, you may want to act quickly before rates rise again. 

How a good mortgage lender can make a big difference

If you're planning to buy a house in Texas this year, it's important to find a good mortgage lender. A good mortgage lender can make the process of buying a house much easier and can help you get the best possible interest rate, even in a volatile market.

If you're not sure where to start, we can help. At Texas United Mortgage we've got a team of experts who are ready to answer any questions you have about the Texas housing market, as well as help you find the perfect mortgage -and best rate- for your needs.

Takeaways

In summary, here are a few things to keep in mind:

-The current average rate for a 30-year fixed-rate mortgage in Texas is about 5.7 percent - and rising. 

-We expect Texas mortgage interest rates to rise slightly in 2022, but they will still remain relatively low when compared to historical averages.

-If you're thinking of buying a house in Texas this year, now might be a good time to do it!

We hope you found this post helpful. If you have any questions, please feel free to contact us. We're always happy to help you find the right mortgage to purchase the home of your dreams!

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