What Were Mortgage Rates in 2022 and How They Changed Throughout the Year

Mortgage rates in 2022 were a rollercoaster ride, to say the least. The year started with rates hovering around 3.7% for a 30-year fixed mortgage, but they quickly dropped to 3.2% in January, a 14% decrease.

As the year progressed, rates continued to fluctuate, influenced by economic factors such as inflation and the Federal Reserve's monetary policies. In March, rates rose to 4.2%, a 31% increase from the low in January.

However, by the summer, rates had fallen back down to 3.9% in July, a 6% decrease from the peak in March. This dip was likely due to the Fed's decision to pause rate hikes, which helped to calm the market and lower borrowing costs.

Throughout the year, mortgage rates remained relatively volatile, making it challenging for homebuyers and refinancers to predict what the future held.

Mortgage interest rates dropped to 2.65% in January 2021, a historically low level, and remained low until April 2022 when they rose to 5%, the highest level since 2011.

This significant increase in interest rates was partly due to global monetary policy responses to post-pandemic inflation and the Federal Reserve's retreat from purchasing mortgage-backed securities. The spread between 10-year Treasuries and mortgage securities increased to around 250 bps, which is roughly 50 bps lower than last year, but still higher than pre-pandemic levels.

Despite the rise in interest rates, refinancing activity remains attractive, with millions of borrowers potentially saving significant amounts by refinancing their mortgages. However, past experiences show that not all borrowers will have the opportunity to refinance, with researchers at the Atlanta Fed finding that Black and Hispanic borrowers were less likely to refinance than other borrowers.

Post-pandemic interest rates dropped to historically low levels, reaching 2.65% in January 2021. This low-rate environment led to substantial refinancing activity, with individuals who refinanced from January 2020 to October 2020 saving $5.3 billion annually.

Mortgage interest rates rose to 5% in April 2022, the first time they had been that high since 2011. This significant increase was a result of global monetary policy responses to post-pandemic inflation.

The rise in interest rates was also influenced by the Federal Reserve's retreat from purchasing mortgage-backed securities (MBSs) and changes in the expected prepayment speeds of newly originated MBSs. This combination of effects led to an increased spread between 10-year Treasuries and mortgage securities.

The spread between 10-year Treasuries and mortgage securities has been around 250 bps, roughly 50 bps lower than last year. However, it's still higher than pre-pandemic levels and the low-interest rate environment of 2020-2021, where it bottomed out around 1.25%.

Mortgage interest rates have already started to decline in anticipation of the Federal Reserve lowering the federal funds rate. This trend is likely to continue as the Federal Reserve takes further action.

The average APR on a 30-year fixed-rate mortgage fell 1 basis point to 6.934% on January 3, 2025.

This is a 6 basis point decrease from one week ago.

The average APR on a 15-year fixed-rate mortgage fell 4 basis points to 6.113% on the same day.

This is a significant drop, especially considering that just a year ago, the 30-year fixed-rate mortgage was 39 basis points higher than it is now.

Mortgage rates can be confusing, but understanding the basics can help you make sense of them. On average, a 30-year fixed-rate mortgage had an APR of 6.934% on January 3, 2025.

A basis point is one one-hundredth of one percent, so a 1 basis point drop is a tiny change. However, it can add up over time, and rates are expressed as annual percentage rate, or APR.

The Federal Reserve's monetary policy indirectly influences mortgage rates by causing short-term interest rates to rise, which in turn increases interest rates for home loans. This is why rates tend to go up when the central bank raises the federal funds target rate.

A lender's physical locations and overhead costs can also impact the interest rate you qualify for. Online lenders, with fewer fixed costs, often offer lower mortgage rates.

Your individual credit profile affects the mortgage rate you qualify for, with a strong credit history and good score (at least 680) typically resulting in a lower interest rate.

VA loan interest rates are influenced by various factors, including market forces beyond the lender's control.

Inflation, for instance, can impact VA loan rates, as a rising inflation rate can lead to higher interest rates.

Job growth, on the other hand, can have a positive effect on the economy, potentially causing interest rates to decrease.

The secondary mortgage market also plays a significant role in determining VA loan rates, as changes in this market can affect the availability and cost of credit.

APR is a broader reflection of borrowing costs, including the interest rate and fees associated with getting the mortgage. It takes into consideration items like interest rate, origination fees, closing agent fees, discount points, and other fees dependent on the specific transaction.

The interest rate is just the cost of borrowing money, whereas APR includes lender fees and other expenses. This makes APR the total cost of your loan, making it the best number to look at when comparing rate quotes.

APR is typically higher than your base interest rate. In fact, it's a tool that can help you compare mortgage offers, but understand that lenders may calculate APR differently.

Here's a key difference between APR and interest rate:

Some lenders might offer a lower interest rate, but their fees are higher than other lenders. This means you'll want to compare APR, not just the interest rate, to get the best deal.

Interest rates can be a complex and intimidating topic, but understanding how they work can help you make informed decisions about your finances. Here's the lowdown:

Lenders have a base rate that takes into account the bigger picture, and they adjust it up or down depending on how much risk they think you pose. If you seem like a safe bet, you're more likely to get a lower interest rate.

Your credit score plays a huge role in determining your mortgage rate. A higher credit score means you're seen as less of a risk, and lenders are more confident you'll make your payments on time.

Your down payment also affects your mortgage rate. Paying a larger percentage of the home's price upfront reduces the amount you're borrowing and makes you seem less risky to lenders.

Jumbo loans tend to have higher interest rates than other types of loans. This is because they're larger and more complex, making them riskier for lenders.

The economy can also impact mortgage rates. Changes in inflation and unemployment rates can put pressure on interest rates, making them go up or down.

Here are some key factors that can influence your mortgage rate:

Understanding how your daily habits affect your monthly payments might seem like a stretch, but let's dive in. Your loan balance and interest rate have a huge impact on your monthly payments.

The interest rate is a key factor, as seen in the example where a 30-year fixed-rate mortgage with a starting loan balance of $425,000 had monthly payments of $2,281 at a 5% interest rate, $2,548 at a 6% interest rate, and $3,119 at an 8% interest rate.

A 1 basis point change in the interest rate can add up over time. For instance, the 30-year fixed-rate mortgage APR fell 1 basis point to 6.934% on January 3, 2025, which is a relatively small change, but it can still affect your monthly payments.

Here's a rough idea of how different interest rates can affect your monthly payments:

These numbers are estimates and don't include taxes, mortgage insurance, homeowners insurance, and HOA fees, but they give you an idea of how interest rates can impact your monthly payments.

Mortgage rates have fluctuated over the years, with some periods being more favorable than others. In 2021, the average mortgage rate for a 30-year home loan was 2.96%, a historic low.

According to Freddie Mac's data, the highest annual rate came in 1981, peaking at 16.64%. This is a stark contrast to the current rates, which, although higher than in recent years, are still lower than they were for most of the 70s, 80s, and 90s.

Here's a look at the 30-year fixed-rate mortgage average by year, as tracked by Freddie Mac since 1971:

Historical mortgage rates have varied significantly over the decades. The highest annual rate came in 1981, peaking at 16.64%.

In the 1970s, mortgage rates were relatively high, with the average monthly rate ranging from 7.38% in 1972 to 9.19% in 1974. The rates continued to rise throughout the decade, peaking at 16.64% in 1981.

Here's a breakdown of the average monthly mortgage rates by decade:

The 1980s saw a significant spike in mortgage rates, with the average monthly rate reaching 16.64% in 1981. This was largely due to the Federal Reserve's efforts to combat inflation.

In contrast, the 2020s have seen a more modest increase in mortgage rates, with the average monthly rate reaching 5.34% in 2022. Despite this, rates are still lower than they were for most of the 1970s, 1980s, and 1990s.

Interest rates on existing mortgages can vary significantly. According to the National Mortgage Database, interest rates on existing mortgages can be high, with around 7.4% of mortgages still having interest rates of at least 6% in 2020 and 2021. Even when interest rates fall to historic lows, some borrowers may still be left behind.

Black and Hispanic borrowers were less likely to refinance than other borrowers, even after controlling for factors like credit scores, home equity, and income. This is a concerning trend, as refinancing can create significant savings and improve financial stability.

The FDIC found that lenders tend to target borrowers with high loan balances, high incomes, and high credit scores when they are capacity constrained. This means that some borrowers may not get the opportunity to refinance, even when interest rates are low.

Here's a breakdown of the number of mortgages with high interest rates in 2020 and 2021:

These numbers highlight the need for refinancing opportunities to be made more accessible to all borrowers, regardless of their background or financial situation.

In 2022, mortgage rates were a major concern for many homeowners. The National Mortgage Database showed that even as interest rates fell to historic lows in 2020 and 2021, about 7.4% of mortgages still had interest rates of at least 6%.

Many borrowers were left behind, especially Black and Hispanic borrowers, who were less likely to refinance than other borrowers, even after controlling for factors like credit scores, home equity, and income.

The average APR on a 30-year fixed-rate mortgage was 6.934% in January 2025, a 1 basis point drop from the previous week. A basis point is one one-hundredth of one percent.

Refinancing can create significant savings and potentially improve financial stability for millions of borrowers. The CFPB is exploring ways to streamline the refinancing process and reduce closing costs.

Here's a comparison of interest rates on existing mortgages in 2020 and 2021:

These numbers highlight the disparity in refinancing opportunities for eligible borrowers.

Higher interest rates combined with higher home prices have contributed to a lack of mortgage affordability. This large increase in rates alone produces a significant strain on housing affordability, adding $1,265 to principal and interest payments on a $400,000 loan.

The surge in home prices over the same period has exacerbated the increase in payments, making it even harder for people to afford their homes. Even at slightly lower rates in today's market, the increase in payments is still substantial, adding $838 to principal and interest payments.

Looking at both factors, the payment on a median-priced home with a 5% down payment increased $1,532 or 113% from 2021 to 2023. This is a staggering increase, and it's no wonder that many people are struggling to afford their homes.

Some borrowers may be eligible to refinance their mortgages, but even with falling interest rates, many are left behind. For example, about 3.7 million mortgages still had interest rates of at least 6% and another 3.5 million had interest rates of at least 5% even after interest rates fell to historic lows in 2020 and 2021.

Here's a breakdown of the increase in payments on a median-priced home with a 5% down payment:

These numbers highlight the significant impact of interest rate increases on mortgage affordability. As interest rates continue to fluctuate, it's essential to monitor and understand the effects on the housing market.

Mortgage rates in 2022 were significantly higher than in previous years. In April 2022, mortgage interest rates rose to 5%, the first time they had been that high since 2011.

This rise in interest rates was a sharp increase from the low-rate environment of 2020-2021, where mortgage interest rates bottomed out around 2.65% in January 2021. That low-rate environment led to substantial refinancing activity, with researchers estimating that individuals who refinanced from January 2020 to October 2020 saved $5.3 billion annually.

The average APR on a 30-year fixed-rate mortgage in April 2022 was not specified in the article, but we do know that it was higher than 6.934%, which was the average APR on a 30-year fixed-rate mortgage on January 3, 2025.