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Average 30-year fixed mortgage rates dropped nearly 50 basis points last week, and rates remain low today.
Where rates will go next largely hinges on inflation. In October, price growth showed signs that it’s starting to come down to a more sustainable level. But with just one month of promising inflation data, it’s hard to predict exactly where rates will go in the coming months and years.
Based on current conditions, there are a few possible outcomes we could see in regards to mortgage rates in 2023.
The first is that inflation continues to come down, the Federal Reserve is able to slow its pace of hikes to the federal funds rate, and mortgage rates slowly inch down throughout the year.
The second possible scenario is that the tightening from the Federal Reserve pushes the US economy into a recession. In this case, mortgage rates would likely come down faster, but it would be at the expense of a healthy economy.
Many experts think this is the likeliest scenario. In its August commentary, the Mortgage Bankers Association said it believes that there’s a 50% likelihood of the economy experiencing a mild recession in the next 12 months. Others believe it’s not a question of if there will be a recession, but when.
The third possible outcome is that inflation starts to increase again, and the Fed has to shift back to aggressive rate hikes to try to tame it. This would likely push mortgage rates up past 7% and significantly increase the chances of a recession in 2023.
Mortgage rates today
Mortgage refinance rates today
Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
Mortgage rate projection for 2023
Mortgage rates started ticking up from historic lows in the second half of 2021 and have increased over three percentage points so far in 2022. They’ll likely remain near their current levels for the remainder of 2022.
But many forecasts expect rates to begin to fall next year. In their latest forecast, Fannie Mae researchers predicted that rates are currently peaking, and that 30-year fixed rates will trend down to 6.2% by the end of 2023.
Whether mortgage rates will drop in 2023 depends on if the Federal Reserve can get inflation under control.
In the last 12 months, the Consumer Price Index rose by 7.7%. This is a slowdown compared to the previous month’s numbers, which means the Fed may be able to start slowing its pace of hikes to the federal funds rate.
As inflation slows, mortgage rates will likely start to fall as well. If the …read more
Source:: Business Insider