Will Mortgage Rates Go Down in 2023?

Mortgage rates fell to an all-time low of 2.65% in 2021. Now they’re more than double that, and everyone is asking the same question. Will mortgage rates drop in 2023? Let’s break it down.   Why are mortgage rates so high? Mortgage rates are influenced by several factors, the foundation of which is the overall state of the economy. When the economy is doing well and moving fast, rates are typically higher. When the economy is sluggish, rates are usually lower. Seem backward? Here’s why it works that way:   The Fed Many people think that the Federal Reserve (also known as “the Fed”) sets mortgage rates, but that’s not quite true. The Fed sets the federal funds target rate, which guides the amount that banks charge each other to borrow money and impacts the rates they charge consumers, too. That’s because it changes the amount banks must charge to cover their own costs. Why does the Fed ever raise rates? Everyone likes a lower interest rate—right? The Federal Reserve has two jobs, called its “dual mandate,” as assigned by Congress. It must act to keep prices stable in the economy and to support maximum employment. One of the ways it does this is by moderating interest rates to support a stable financial system (O’Connell, 2023).    For example… When the economy is slow—like it was during the initial COVID-19 crisis—the Fed lowers its rates to increase cash flow and encourage consumer spending. But when the economy is doing well and moving fast, borrowing, consumer spending, and demand are all elevated—which can cause inflation. A major problem with inflation is when prices rise at a rate with which salaries don’t keep pace, people suddenly can’t afford to buy things, and the economy grinds to a halt. For that reason, when the economy is moving too quickly and inflation is growing unsustainably, the Fed increases the federal funds rate to constrict cash flow. The idea is that higher rates—while uncomfortable—will slow spending to a sustainable pace while preventing an economic crash down the road. Since the housing market, consumer spending, and inflation all hit peaks in late 2022, the Fed pumped the brakes with interest rate hikes in an effort to divert a full-blown recession.   Will mortgage rates drop in 2023? Now that we know why rates are so high, we can make an educated guess about their future. Many experts suggest that 2023 will see a slowdown in the U.S. economy, and if that’s true, mortgage rates will drop as well. Will mortgage rates go down in 2023? Here are the detailed answers from top industry experts:   Mortgage Bankers Association The Mortgage Bankers Association has stated that “long-term rates have already peaked. We expect that 30-year mortgage rates will end 2023 at 5.20%.” As of this writing, the average APR for the benchmark 30-year fixed-rate mortgage is over 7%, so that prediction represents a significant drop by 2023’s end.   National Association of Realtors The NAR Director of Forecasting, Nadia Evangelou, predicts that “mortgage rates likely will settle below 6% and experience less volatility this year.” She continued by saying that “Although rates remain more than double a year ago, they will likely stabilize as inflation will continue to slow down in the coming months.”   Goldman Sachs Analysts at Goldman Sachs are less optimistic, predicting that mortgage rates will average 6.5% in 2023. Why this rate? The investment bank expects a “significant decline in U.S. inflation,” but also notes “that the rapid decline in mortgage origination, especially refinances, has caused some lenders to exit or scale back lending. This has the potential to allow the remaining lenders to expand their margins by pushing mortgage rates higher” (Lambert, 2023).   Freddie Mac In its most recent forecast, Freddie Mac predicted that the 30-year fixed-rate mortgage will average 6.4% in 2023, with a lower average of 6.2% in the fourth quarter. The financial company cited the job market, moves from the Fed, and the decelerating housing market.   Morgan Stanley In its U.S. housing market outlook forecast, Morgan Stanley predicts that 30-year fixed mortgage rates will average 6.2% in 2023. In a best-case scenario, the investment bank writes that mortgage rates could fall below 6%, but that would require the Fed to successfully tame inflation sooner than expected (Lambert, 2022).   Bankrate Bankrate’s chief financial analyst, Greg McBride, CFA, forecasts mortgage rates to fall to 5.25% by the end of 2023. He explained that “we should see a notable pullback in mortgage rates as inflation pressures ease and as the economy slows” (Ostroski, 2023).   Final thoughts Financial and real estate industry experts agree that mortgage rates will fall in 2023. By how much? That’s still up for debate, with some experts forecasting a nearly 2% drop and others one of less than 1%. No matter the number, lower mortgage rates represent relief for buyers struggling with affordability. If you’ve been waiting to buy due to high home prices and high mortgage rates, 2023 is shaping up to be a good year for you. But even as rates come down, they’re not likely to hit 2021 levels—so you’ll want to do everything you can to reduce your rate on your own. That means working on your credit score, looking into a rate buydown, and shopping around to find the lender with the best terms for you.    Let’s buy your dream home in 2023 If falling mortgage rates are music to your ears and you’re ready to buy in 2023, get in touch. Not quite sure about the next steps? Our expert team can help. Click the button below so we can help you make your homeownership goals a reality.

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Housing Market Bounces Back as Mortgage Demand Rises with Falling Interest Rates

As mortgage rates rose last year, activity in the housing market slowed down. And as a result, homes started seeing fewer offers and stayed on the market longer. That meant some homeowners decided to press pause on selling.   Now, however, rates are beginning to come down—and buyers are starting to reenter the market. In fact, the latest data from the Mortgage Bankers Association (MBA) shows mortgage applications increased last week by 7% compared to the week before.    So, if you’ve been planning to sell your house but you’re unsure if there will be anyone to buy it, this shift in the market could be your chance. Here’s what experts are saying about buyers returning to the market as we approach spring.   Mike Fratantoni, SVP and Chief Economist, MBA: “Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall. As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”   Lawrence Yun, Chief Economist, National Association of Realtors (NAR): “The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”   Thomas LaSalvia, Senior Economist, Moody’s Analytics: “We expect the labor market to remain robust, wages to continue to rise—maybe not at the pace that they did during the pandemic, but that will open up some opportunity for folks to enter homeownership as interest rates stabilize a bit.”   Sam Khater, Chief Economist, Freddie Mac: “Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of Millennial renters will provide support to the purchase market.”   If you’ve been thinking about making a move, now’s the time to get your house ready to sell. Contact a local real estate professional to learn about buyer demand in your area and the best time to put your house on the market.

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How to Get the Best Mortgage Rates in Spokane

As a home buyer in Spokane, you want to get the best mortgage rate available. That means understanding how interest rates are determined and exploring your options for getting a lower rate. Keep reading to learn more about what factors affect mortgage rates and what you can do to save yourself money on your loan.   What Factors Affect Mortgage Rates? The most important factor determining your mortgage rate is market conditions. Interest rates fluctuate based on economic trends, so when the economy is doing well and inflation is expected, mortgage rates will usually rise. Additionally, demand for mortgages affects mortgage rates; when there’s high demand for loans, lenders may raise their interest rates as a way to limit the number of loans they have to process.   What Options Do Home Buyers Have? Fortunately, there are several options available for home buyers who want to get a lower mortgage rate. One option is buying discount points, which are upfront payments that allow you to access lower interest rates over the course of your loan term. Another option is taking advantage of special home buyer programs offered through local or state governments; these programs often provide access to more affordable mortgages with lower interest rates than conventional loans. Additionally, choosing the right closing date can also help you get a better rate; try scheduling your closing at the end of the month if possible as this could help you save money on your loan. Finally, shopping around and increasing your downpayment can also work in your favor; compare different lenders and make sure you put down as much as possible so that you’ll be seen as less risky by lenders (and thus qualify for better interest rates). Lastly, plan ahead so that you have time to improve your credit score before applying for a loan; higher credit scores will give you access to better rates!   No one wants to leave money on the table—especially when it comes to major purchases like homes! By understanding what factors affect mortgage rates and exploring all available options, home buyers in Spokane can get a great deal on their loan by accessing lower interest rates. From buying discount points to increasing your downpayment and shopping around for different lenders, there are many strategies that can help make sure you don’t pay more than necessary for your dream home!

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