Mortgage rates have a significant impact on the real estate market, affecting both buyers and sellers. Even a small shift in interest rates can significantly affect the affordability of homes, monthly payments, and the overall demand for properties. Therefore, it is essential to keep an eye on mortgage rate trends and predictions to make informed decisions. In this blog post will analyze mortgage rate predictions for next week and what it means for buyers and sellers.
What Are the Mortgage Rate Predictions for Next Week?
According to Bankrate's weekly poll of mortgage experts conducted from April 6-11, 2023, most of the experts predicted that mortgage rates would move down in the coming week. Several factors influence the direction of mortgage rates, such as economic indicators, inflation, global events, and government policies. The Federal Reserve's monetary policy, especially the federal funds rate, has a significant impact on mortgage rates.
When the Fed raises the federal funds rate, it becomes expensive for banks to borrow money, leading to an increase in mortgage rates. Inflation also plays a crucial role in determining mortgage rates. When inflation rises, the purchasing power of money decreases, and lenders charge higher interest rates to compensate for the loss of purchasing power. Global events, such as political instability or economic turmoil, can also affect mortgage rates.
Bankrate's weekly poll of mortgage experts offers valuable insights into the direction of mortgage rates in the near future. According to the latest poll conducted from April 6-11, 2023, 70 percent of experts predicted that mortgage rates would go down, while 20 percent predicted that rates would remain the same, and only 10 percent predicted that rates would go up.
Ken H. Johnson, a real estate economist at Florida Atlantic University, believes that despite the economic factors that suggest otherwise, the demand for Treasuries is driving mortgage rates down. He predicts that long-term mortgages should decline next week. Similarly, Mitch Ohlbaum, a mortgage banker at Macoy Capital Partners, thinks that as markets calm down, mortgage rates will decline over the next few months and settle into a more normal range.
Dick Lepre, a loan agent at CrossCountry Mortgage, believes that a disappointing BLS Employment Situation Report will signal an impending drop in GDP in Q2 2023, leading to lower inflation and a lower trend in mortgage rates. Greg McBride, CFA, chief financial analyst at Bankrate.com, thinks that the Fed's rate hikes are having the desired effect of cooling the labor market and getting inflation under control, which will sustain the pullback in mortgage rates.
What Does it Mean for Buyers and Sellers?
Lower mortgage rates mean buyers can purchase more expensive homes with lower monthly payments. This can encourage more people to enter the real estate market, leading to increased demand, and potentially higher prices for sellers. On the other hand, higher mortgage rates may discourage buyers from purchasing homes, leading to lower demand, and potentially lower prices for sellers.
Therefore, for buyers, it is essential to keep track of mortgage rate trends and predictions to time their purchase when rates are low, leading to significant cost savings. On the other hand, sellers should keep track of mortgage rates to price their homes competitively, taking into account the impact of mortgage rates on buyer demand.
The current trend of declining mortgage rates can have a positive impact on both buyers and sellers. Buyers can take advantage of lower interest rates to afford more expensive homes or lower their monthly payments. For example, a buyer who takes out a $300,000 mortgage with a 4% interest rate would pay $1,432 in monthly payments. However, if the interest rate drops to 3.5%, the monthly payment drops to $1,347, saving the buyer $85 per month or $30,600 over a 30-year mortgage.
Sellers can also benefit from lower interest rates as it increases the demand for properties. When interest rates are low, buyers can afford to purchase more expensive homes, leading to higher demand and potentially higher selling prices. Therefore, sellers should consider listing their properties during a period of declining interest rates to maximize their profits.
Mortgage Rate Predictions for the Next Month?
As homebuyers and homeowners continue to watch the real estate market, a key factor that they are also paying attention to is mortgage rates. The cost of borrowing affects affordability, and can therefore influence both demand and supply in the housing market. The past few years have seen a lot of fluctuations in mortgage rates, and many potential buyers are looking for guidance about what to expect.
The average 30-year fixed-rate mortgage (FRM) declined from 6.42% on March 23 to 6.32% on March 30, according to Freddie Mac. This decline followed two consecutive weeks of rate drops, largely attributed to the banking sector’s instability. However, we may have already seen the peak of this rate cycle. Interest rates are notoriously volatile and can fluctuate significantly, and it’s important to consider both short-term and long-term predictions.
In 2022, as inflation surged uncontrollably, the Federal Reserve implemented measures to curb it, resulting in a substantial increase in interest rates. The typical 30-year fixed-rate mortgage doubled during the year. However, as inflation gradually subsides, the Federal Reserve is now reducing the magnitude of its rate hikes. Moreover, due to concerns about a potential recession, many experts anticipate that mortgage interest rates will remain within a narrower range than the sharp spikes witnessed earlier in 2022.
Nevertheless, there remains a possibility of interest rates rising every week or in response to another global event that causes economic uncertainty.
Experts from CJ Patrick Company, Clever Real Estate, the National Association of Realtors, and others predict whether 30-year mortgage rates will climb, fall, or level off in April. Ralph DiBugnara, President at Home Qualified, predicts that 30-year and 15-year fixed mortgage rates will trend down on average, settling at 6% and 5.5%, respectively.
Nadia Evangelou, Senior Economist & Director of Forecasting at the National Association of Realtors, predicts that mortgage rates will continue to fluctuate next month depending on new developments in the banking sector.
She believes that mortgage rates will remain near 6.5%, with rates gradually moving down in the following months. Selma Hepp, Chief Economist at CoreLogic, agrees that mortgage rates will move around the 6.5% range, with the potential for moving closer to 6% in April.
Hannah Jones, Economic Data Analyst at Realtor.com, predicts that incoming economic data will determine mortgage rate movement in April. She expects that should upcoming data show inflation slowing, this dip may stabilize mortgage rates.
Tony Chahal, SVP of Partnerships at Clever Real Estate, expects the Fed to curb inflation so it's manageable, but not be so aggressive with rate hikes that it triggers further bank failures. He believes that the Fed will be less hawkish in the short term on increasing interest rates until it has put safeguards in place to protect the banking system.
The Fed is now in a tough position as it still has maintained its goal to curb inflation to 2% annually. Annual inflation in February was 6%, well above the Fed’s target of 2%, which is particularly concerning due to the rising cost of services.
Mortgage Rate Trends
Mortgage rates fluctuated significantly to open in 2023. In the first quarter, the average 30-year fixed rate went as low as 6.09% on Feb. 2 and climbed up to 6.73% on March 9, according to Freddie Mac. The range can be largely attributed to the Federal Reserve’s ongoing fight against inflation, juxtaposed with uncertainty in the banking sector sparked by Silicon Valley Bank’s collapse. With the economy likely heading into a recession, we may have already seen the peak of this rate cycle.
The 30-year fixed rate dropped from 6.42% on March 23 to 6.32% on March 30. The average 15-year fixed mortgage rate similarly fell, going from 5.68% to 5.56%.
|Month||Average 30-Year Fixed Rate|
Source: Freddie Mac