Previously the mortgage rates were expected to fall in the year 2023. But with the rising inflation, the professionals have predicted that rates to remain elevated amid the ongoing economic uncertainty. According to the nation’s leading real estate economists, the rates have stayed higher than the expected due to continued resilience in the U.S. economy. As per the latest reports of October, the mortgage rates are above 7%.
The mortgage rates remain fraught with significant affordability constraints. As the baseline scenario, the 30-year mortgage rates are expected to stay above 6.5% through the remainder of 2023. The rates are not expected to surge but they are not likely to fall dramatically.
Here’s a quick update on where the mortgage rates are expected to head for the rest of the year and how they will potentially impact the housing market in general.
Various Industry groups have completely revised the mortgage rates forecast upwards over the past few months according to the developments in the U.S economy. Here a quick overview to the mortgage standings :
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Fannie Mae
This government-sponsored enterprise has predicted that the average 30-year fixed rate of the housing forecast in the third quarter of t 2023 will be 7%. And as far as the future predictions the mortgage rate will dip below 6% until 2025, no sooner than that. Further, the predicted rate for the coming year 2024 is 6.5%.
Mortgage Bankers Association
Previously MBA has predicted that the mortgage rates will fall below 6% in 2023 but recently the industry predicted that the average rate will stay above the threshold of 6% until spring 2024. In the latest forecast the MBA economist stated “Assuming the spread between the mortgage rate and Treasury rates narrows as rate volatility settles and the monetary policy outlook becomes less uncertain, and as the US economy slows, we expect rates to decline gradually at the end of 2023,”
Wells Fargo
As per the latest U.S Economic Outlook , Wells Fargo predicted that the 30-year mortgage rate will stand at 7.1% in the third quarter of 2023 and pulling back to a percentage of 6.75 in the fourth quarter. The forecasting group at the bank predicted that the mortgage rates will fall below 6% in the third quarter of 2023 only in case the Federal Reserve keeps the policy stringent and the inflation is back to the set target of 2%.
National Association of Realtors
In the August Economic Outlook , NAR expects that the mortgage rates are expected to fall to 6.3% by the end of this year . Further, the association predicts that rates are expected to decline to 6% in the year 2024.
NAR chief Economist Lawrence Yun in the recent quarterly forecast said that “Home sales were down due to higher mortgage rates and limited inventory,” While further explaining the cause he stated “Affordability challenges are easing due to moderating and, in some cases, falling home prices, while the number of jobs and incomes are increasing.”
Realtor.com, Redfin
As per the updates of the National Housing and Economic Forecast, the popular real estate marketplace predicted that the average mortgage rates will be 6.4% in the year 2023 and decline to minimum 6.1% at the end of the year. Moreover, the real estate brokerage Redfin predicts that the rates will stay above the bar of 6% in the remainder of 2023.
Will mortgage rates go down in November?
Mortgage rates fluctuated in the first half of 2023 but in the second half, they trended upward. The average 30-year fixed rate lowered to 6.09% in February and spiked up to 7.57% in Oct. 12 , according to Freddie Mac.
The spike in the percentage is largely attributed to Federal Reserve’s ongoing fight against the rising inflation , uncertainty in the banking sector that is caused by the Silicon Valley Bank Collapse. Moreover with the ongoing threat to the financial market and the fallout from the U.S. debt ceiling talks , the Fed will be more likely to make hikes to keep the interest rate low.
As the economy is likely to head in a recession, we have already seen the peak of the mortgage rate cycle. Moreover as per the experts from First American , CJ Patrick Company , CoreLogic weigh in that whether the 30-year mortgage rates will surge , fall or level off in the coming month on November.
How to get lower mortgage refinance rates?
There is good news for you all despite the elevated mortgage rates, you can secure a lower rate. These methods can be advantageous to you if you bought a home in the tenure of mid-October to early November last year when the rates were super high. As there are closing cost and refinancing fees the expert recommend that refinancing is the viable option when you snag a mortgage rate lower than 1%. But here are the quick actions you can take to lower the mortgage refinance rates :
- Get a rate quote estimate for more than three lenders
- Request the lenders to waive or reduce the closing cost
- Negotiate with the lender to choose the best deal
- Take the right steps to strengthen your credit score
- Save money for large down payment
- Preferable to choose a short loan
- Lock the deal with low-interest charges
Mortgage Rates Forecast for the Next 5 Years
Real estate economists have predicted that the mortgages rates to surge further in the coming years especially when taking in consideration the unprecedented situation over the past years. The key reason for mortgage rates to go in tall order will be low housing inventory.
As per the saying of Daryl Fairweather, the chief economist at Redfin “ When the mortgage rates come down, we’re going to be in store for another hot housing market where there are more buyers than sellers jacking up prices because we haven’t solved the problem “ and later he said “ “It’s still that affordability problem. That’s going to stay with us.”
The direction of the mortgage rates will also be determined by the direction of interest rates. Moreover, the timeline for the downward trend of mortgage rates remains uncertain.
Why the mortgage rates are expected to stay high?
The high mortgage rates are actually the by-product of Federal Reserve’s battle to bring inflation down to 2% . The federal funds rate was raised seven times by the central bank in 2022 and four times in the year 2023.
The chief economist at Keeping Current Matters, a real estate market insights company stated that “For real estate markets, the Federal Reserve’s decision translates into elevated borrowing costs through the remainder of 2023,”
The committee within the Fed known as the Federal Open Market Committee sets monetary policy with an expected benchmark rate to end by 5.6% at the end of the year. The current mortgage rate stands at 5.25% and 5.5% and the further rate hike in this year is not off the table.
There is no guarantee that FOMC will again increase the mortgage rates this year. The mortgage rates are also dependent on the economic data on inflation and empowerment. If the economy will gain unexpected strength then it is highly likely that the rates will continue to surge up. But on the other hand, a slowdown in price growth can also be expected if conditions stabilize.
Last but not least, another contributing factor is because of the abnormally large spread between the 30-year fixed mortgage rate and the yield on 10-year treasury bonds. The spread reached the historic value of 1.7 percentage points but presently it is closer to 3% due to high levels of volatility on the investor side.
Best Mortgage Lenders of October 2023
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