In this article, we'll explore the latest predictions for mortgage rates over the next 90 days and what it means for those looking to buy or refinance a home. For prospective homebuyers and current homeowners, keeping a close eye on mortgage rates is crucial in determining when to make a move in the housing market.
The Federal Reserve's recent shift in expectations for short-term interest rates has stirred the markets. The pause in interest rate hikes in June was expected but appeared to be short-lived. Fed members projected further monetary policy changes for the rest of 2023, indicating at least one rate hike and the possibility of more in the near future.
The market response included recalibration of positions, pushing interest rates higher despite signs of cooling inflation and slightly looser labor conditions.
Mortgage Rates Forecast for Next 90 Days
According to Hsh.com, their recent forecast didn't align accurately with market developments. Fixed mortgage rates, initially stable, took an unexpected turn following the Fed's May meeting. Their late May forecast missed the mark, anticipating a range of interest rates that did not align with the subsequent market shifts. This deviation was observed in both conforming 30-year fixed-rate mortgages and hybrid 5/1 ARMs, highlighting the volatility in the market during that period.
Anticipating the Fed's upcoming policy decisions is becoming more challenging. With an extended gap between the July and September meetings, there is a plethora of economic data to consider before the next policy move. Key indicators include employment reports, CPI data, PCE prices, and GDP growth. Inflation has shown signs of deceleration, while the economy maintains a modest growth rate.
The labor market is slightly looser, with a decline in job openings, but wage growth remains a concern. The Fed aims to strike a balance between policy effectiveness and preventing financial market conditions from loosening excessively.
Considering the potential for another rate hike in the coming months, mortgage rates may not see significant declines until there is more clarity in the forward path of the Fed's policies. The uncertainty will persist until the release of the next Summary of Economic Projections, which is expected to bring more clarity. Depending on the inflation trajectory, mortgage rates may either decline or rise. The upcoming September Fed meeting could serve as a turning point for interest rates, impacting the direction they take for the remainder of the year.
In 2022, rampant inflation prompted the Federal Reserve to take action, resulting in significant interest rate increases. The average 30-year fixed-rate mortgage more than doubled during that year. However, as inflation gradually cools, the Fed's approach to rate hikes is adjusting, and experts predict mortgage interest rates will stabilize within a tighter range compared to the spikes observed in early 2022.
While rates may fluctuate in any given week or due to global events causing economic uncertainty, projections suggest a more moderate trajectory in the coming months.
As of September 21, the 30-year fixed-rate mortgage averaged 7.19%, according to Freddie Mac. Various housing authorities anticipate that the average for the third quarter of 2023 will fall below this figure. The National Association of Realtors predicts the average 30-year fixed interest rate to settle at 6.5% for Q3, while Wells Fargo provides the highest forecast of 7.05%.
It's important to note that mortgage rates recently increased after two consecutive weeks of drops. The average 30-year fixed rate edged up from 7.18% on September 14 to 7.19% on September 21. Similarly, the average 15-year fixed mortgage rate rose from 6.51% to 6.54% during the same period.
The final thoughts are that as we approach the fall, the mortgage rate forecast remains subject to the Fed's evolving policy decisions and economic data. Investors and the market at large will closely analyze economic indicators to anticipate interest rate movements. The September Fed meeting is anticipated to be a critical event that may set the tone for interest rates in the coming months. Stay tuned for updates and insights as we monitor this dynamic financial landscape.
Mortgage Rates Predictions for Year End 2023
The National Association of Realtors (NAR) senior economist and director of forecasting, Nadia Evangelou, predicted that if inflation continues to slow down, mortgage rates may stabilize below 6% in 2023. The Mortgage Bankers Association (MBA) expects that 30-year mortgage rates will end in 2023 at 5.2%.
On the other hand, Freddie Mac forecasts that the average 30-year mortgage will start at 6.6% in Q1 2023 and end at 6.2% in Q4 2023. Therefore, housing market stakeholders are keeping a watchful eye on the data-dependent Fed for signals on whether policymakers will maintain or cut the benchmark rate or resume more aggressive tightening measures.
What's the best strategy for prospective homebuyers in this uncertain economic climate? “Be prepared to jump on a dip in rates,” says Robert Frick, the corporate economist at Navy Federal Credit Union. “But only if you have a property in mind that fits your budget.”
According to Compass U.S. region president, Neda Navab, there have been signals that mortgage interest rates may be at or near their peak, given recent encouraging news around inflation and a corresponding drop in the U.S. Treasury yields that help set mortgage rates.
A sustained drop could push mortgage rates into the 5% range late in the second quarter or in the second half of 2023, but that's definitely not guaranteed. Mortgage rates are likely to move in the 6% to 7% range over the next few weeks, which continues to pose a significant challenge to affordability, according to Realtor.com economist, Jiayi Xu.
The fight over raising the debt ceiling is likely to drag into the summer, and mortgage borrowers should expect rate volatility as a result, warns Zillow Home Loans senior macroeconomist, Orphe Divounguy. This rate volatility could mean that prospective homebuyers should not wait for mortgage rates to decrease further, as they may start increasing again soon.
To sum up, it is anticipated that the mortgage rates in the upcoming 90 days will fluctuate, with marginal rises or drops contingent upon the Federal Reserve's efforts to curb inflation. Those intending to buy or refinance a home should remain alert for any favorable changes in the rates, provided they have a property in sight that meets their financial plan. Additionally, they should keep a close tab on the data-based actions of the Fed to gauge whether they will retain or diminish the benchmark rate or adopt more forceful measures to tighten the market.
Home loan rates are being influenced by high inflation and the Federal Reserve's actions to restrain it, leading to fluctuating rates. The best strategy for prospective homebuyers is to be prepared to jump on a dip in rates, but only if they have a property in mind that fits their budget. Experts predict that mortgage rates may stabilize below 6% in 2023, but Freddie Mac forecasts rates to end at 6.2%.
With the fight over raising the debt ceiling likely to drag into the summer, borrowers should expect rate volatility. Prospective homebuyers should remain vigilant for any favorable changes in the rates but shouldn't wait for rates to decrease further, as they may start increasing again soon.
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