# Home Prices Are Setting Records While Mortgage Rates Plunge – Is It Time To Refinance? Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-03-21 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Why Home Prices and Mortgage Rates are Rising in 2022 Meta Description: Discover why home prices are setting records and mortgage rates are dropping in 2022. Find out how to navigate the current market to make informed decisions URL: https://financedigest.com/home-prices-are-setting-records-while-mortgage-rates-plunge-is-it-time-to-refinancehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/istock-1205240037-1736815952611-compressed.jpg) 2022 was supposed to be the year that the property market returned to normal. After more than eighteen months of home prices rapidly rising, experts expected a plateau. After all, the Fed was raising interest rates to counter high inflation, making the prospect of spending big on a home much less alluring. But 2022 has not gone according to anyone’s plans. Vladimir [Putin’s invasion of Ukraine](https://www.financedigest.com/putin-says-peace-talks-with-ukraine-are-at-dead-end-goads-the-west.html "Putin says peace talks with Ukraine are at dead end, goads the West") has thrown everything into doubt, including our very existence as a species (although fears of nuclear war are almost certainly overblown). The [property market](https://www.financedigest.com/2017-spanish-property-market-gems-kyero-com-gazes-into-the-crystal-ball.html "2017 Spanish property market gems – Kyero.com gazes into the crystal ball") in the US has not emerged unscathed, even if it seems to have little to do with Eastern Europe. Instead of plateauing, [housing prices are shooting up again](https://www.digitaljournal.com/business/us-home-prices-saw-biggest-jump-in-34-years-in-2021/article). Instead of increasing, [mortgage rates](https://www.financedigest.com/uk-housing-market-may-face-perfect-storm-as-mortgage-rates-rise-house-prices-drop.html "UK housing market may face perfect storm as mortgage rates rise, house prices drop") are dropping again, although they are yet to reach the lows of 2021. Why is this happening and what does it mean for the [future of US property](https://www.financedigest.com/brexit-and-the-property-market-what-does-the-future-hold.html "Brexit and the property market: what does the future hold?")? Should you take advantage of today’s low rates to [**know better plan better**](https://knowbetterplanbetter.com/article/how-to-refinance-your-mortgage)? Here is what you need to know.a ## **Why are home prices setting records?** To understand why home [prices are setting records](https://www.financedigest.com/tesla-posts-record-quarterly-deliveries-after-price-cuts-up-4-from-q4.html "Tesla posts record quarterly deliveries after price cuts, up 4% from Q4") in 2022, we have to go back a couple of years. It has been two years since lockdowns in the US began, and at the [time it seemed like every market](https://www.financedigest.com/tough-times-and-risky-business-which-emerging-market-assets-are-a-bet-worth-taking.html "Tough times and risky business – which emerging market assets are a bet worth taking") would suffer. The property market looked set for a crisis, with [home prices](https://www.financedigest.com/germany-home-prices-to-sink-nearly-6-this-year-reuters-poll.html "Germany home prices to sink nearly 6% this year – Reuters Poll") dropping. However, a number of factors turned this around. Firstly, the Federal Reserve lowered [interest rates to historic lows](https://www.financedigest.com/interest-rates-are-cut-to-an-all-time-low-what-will-this-mean-for-small-businesses.html "Interest rates are cut to an all-time low. What will this mean for small businesses?") in order to stimulate economic growth. This led to a surge in demand for affordable mortgages. At the same time, lockdowns slowed construction to a halt, and subsequent [supply chain issues delayed its return](https://www.financedigest.com/uks-j-d-wetherspoon-returns-to-profit-as-supply-issues-ease.html "UK’s J D Wetherspoon returns to profit as supply issues ease") to normalcy. Few people were [selling their homes](https://www.financedigest.com/selling-advice-five-expert-tips-on-how-to-avoid-gazundering-when-selling-your-home-to-save-you-money.html "Selling advice: Five expert tips on how to avoid gazundering when selling your home to save you money"), and supply was therefore extremely constrained. The [rise in demand](https://www.financedigest.com/uk-home-asking-prices-rise-tax-cuts-to-spur-demand-rightmove.html "UK home asking prices rise, tax cuts to spur demand: Rightmove") was limited by the fact that many people were still recovering from lost jobs and businesses, but supply was low enough to mean that there wasn’t enough property to go around. This led to the consistently rocketing prices. That brings us to 2022. With the world getting back to normal, supply was increasing. The [Fed had raised interest rates](https://www.financedigest.com/fed-rates-up-boe-up-ecb-up-stocks-up.html "Fed rates up, BoE up, ECB up, stocks up"), leading to a drop in demand. [Russia’s invasion of Ukraine](https://www.digitaljournal.com/world/battleground-ukraine-day-19-of-russias-invasion/article) impacted the latter, as we will go into next, and this led to increased demand. But that is not the only reason prices are going up again. Rather, bans of Russian energy imports have [raised the gas price](https://www.financedigest.com/analysis-to-raise-prices-or-not-consumer-goods-makers-weigh-bets-on-buyer-strength.html "Analysis-To raise prices or not? Consumer goods makers weigh bets on buyer strength") to historic highs, which is in turn making all consumer goods more expensive. Construction is set to become more expensive than it has ever been, which [raises the value of both already-existing homes](https://www.financedigest.com/viva-el-vino-perfect-spanish-homes-for-wine-lovers-as-unwto-raises-a-glass-to-wine-tourism.html "Viva el vino! Perfect Spanish homes for wine lovers as UNWTO raises a glass to wine tourism") and homes yet to be built. Furthermore, individuals are feeling the crunch. People selling their homes need more [money in their pockets](https://www.financedigest.com/nearly-half-of-parents-still-give-pocket-money-to-their-adult-children.html "Nearly half of parents still give pocket money to their adult children"), especially if they want to buy elsewhere. Agents require more from their commissions. In other words, [housing prices](https://www.financedigest.com/buy-off-plan-to-beat-stalling-house-prices-and-falling-rental-yields-says-jean-liggett.html "“Buy off-plan to beat stalling house prices and falling rental yields” says Jean Liggett ") are going up because the price of everything is going up. Let’s take a look at why mortgage rates are dropping. ## **Why are mortgage rates dropping again?** At the end of 2021, [inflation was setting record](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc.html "UK shop price inflation hits record 8% in January: BRC") highs. This was unsustainable, with the average American struggling just to make ends meet. One of the actions taken to counter [rising inflation was an increase in interest rates](https://www.financedigest.com/uk-inflation-rate-unexpectedly-rises-to-10-4-in-february.html "UK inflation rate unexpectedly rises to 10.4% in February"). This was supposed to happen gradually over 2022. However, [Russia’s invasion of Ukraine](https://www.financedigest.com/russia-promises-to-scale-down-operations-in-northern-ukraine.html "Russia promises to scale down operations in northern Ukraine") and the subsequent increase in costs changed this. Raising the interest rate could no longer counter [price increases](https://www.financedigest.com/syngenta-4q-profit-falls-as-raw-material-prices-increase.html "Syngenta 4Q profit falls as raw material prices increase") caused by an increase in the cost of commodities. Interest [rates dropped to accommodate borrowers and to prevent further price](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes") increases. Mortgage rates have consequently come down. Does this make it a good time to [refinance your own mortgage](https://www.financedigest.com/mortgage-refinancing-how-to-refinance-a-home-loan.html "Mortgage Refinancing: How to refinance a home loan")? ## **Should you refinance your mortgage?** Refinancing your mortgage could be an excellent idea, especially if you initially received a high [interest rate](https://www.financedigest.com/ecbs-centeno-says-interest-rate-close-to-peaking-if-no-new-shocks.html "ECB’s Centeno says interest rate close to peaking if no new shocks"). By refinancing your mortgage, you could lower the amount you pay monthly, while essentially lowering the eventual [cost of your home](https://www.financedigest.com/finance-teams-have-been-left-in-the-dark-on-the-real-cost-of-working-from-home.html "Finance teams have been left in the dark on the real cost of working from home"). It is not as good a time to refinance your mortgage as it was a few months ago. The reality is that [while mortgage rates](https://www.practicalcredit.com/what-is-a-mortgage/) have dropped since the start of Putin’s invasion of Ukraine, they are still significantly higher than they were at the start of the year. However, waiting for them to drop to those same lows is probably futile. The likelihood is that this drop is not going to last all that long. Interest [rates need to rise](https://www.financedigest.com/oil-falls-as-earthquake-impact-on-crude-eases-rate-hike-fears-rise.html "Oil falls as earthquake impact on crude eases, rate hike fears rise"), regardless of what happens in Ukraine, and the Fed is not going to hold off for too much longer. Now is as good a time as any to refinance your mortgage. You can benefit from mortgage rates that, while not as low as in 2021, are lower than they are likely to be for the [foreseeable future](https://www.financedigest.com/recent-technological-advancements-to-propel-growth-of-the-sesame-oil-market-in-foreseeable-future.html "Recent Technological Advancements to Propel Growth of the Sesame Oil Market in Foreseeable Future"). **This is a Sponsored Feature** --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---