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Mortgage rates started inching up mid-week but are back down today. Rates remain the lowest they’ve been since early October.
Though rates have trended down somewhat compared to recent highs, they’re still more than three percentage points higher now than they were at the start of 2022. High rates have dramatically curbed homebuying demand, causing home prices to start to inch down.
Prices could continue to decline, possibly by a significant margin.
“As we near the end of 2022, home values are beginning to drop across most markets, so banks are likely going to be more tentative about extending loans for more than 80% to 90% of the value of the home,” says Eileen Derks, senior vice president and head of mortgage at Laurel Road. “They don’t want customers to be upside down – or owe more on the home than its current market value. As a result, they will likely encourage customers to put more down by increasing the rates for higher value loans. So, continuing to save for a down payment will not only help avoid private mortgage insurance but can yield a lower interest rate and monthly housing payment.”
The economy is slowing now, and it’s possible we’ll experience a mild recession in the new year. But as the economy stabilizes later in 2023, home prices will likely start trending back up.
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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 6.5% by the end of 2023.
The Mortgage Bankers Association also noted that a recession in the first half of 2023 could cause rates to fall even faster. It currently estimates that there’s a 50% likelihood that a mild recession will materialize in the next year.
Whether mortgage rates will drop in 2023 hinges 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 easing up on its pace of hikes to …read more
Source:: Business Insider