Mortgage and Refinance Rates August 10, 2023 | Potential 5% Drop Next Year?

Mortgage and Refinance Rates August 10, 2023 | Potential 5% Drop Next Year?

Mortgage Rates Expected to Fall: A Promising Outlook for Homebuyers

Mortgage Rates

Are you planning to buy your dream home but feeling discouraged by high mortgage rates? Well, here’s some good news for you – mortgage rates are expected to fall later this year and continue to decrease into the next homebuying season.

According to the latest forecast by the Mortgage Bankers Association, mortgage rates are projected to be in the low 5% range by next year’s homebuying season. This forecast hinges on whether inflation continues to come down and if the Federal Reserve stops hiking the federal funds rate. If these conditions are met, mortgage rates could even fall further if the Fed decides to cut rates later this year.

These lower mortgage rates will be a breath of fresh air for many aspiring homebuyers who have been kept out of the market due to the elevated rates. The peak buying season has been particularly challenging, with prospective buyers finding it difficult to afford their dream homes. However, this upcoming drop in mortgage rates brings a promising ray of hope.

What Do Today’s Mortgage Rates Look Like?

  • Average 30-year mortgage rates remain slightly lower compared to last week, but they’re still elevated overall.
  • To get an accurate estimate of how today’s interest rates will affect your monthly payments, you can use our free mortgage calculator.

Our experts are here to help answer your home-buying questions and provide unbiased product reviews, ensuring you make informed decisions. We may receive a commission from our partners, but rest assured, our opinions are always our own.

The Mortgage Rate Projection for 2023

Mortgage rates started ticking up from historic lows in the second half of 2021, rising three percentage points in 2022. However, many forecasts predict a reversal of this trend in 2023.

Fannie Mae researchers predict that 30-year fixed rates will trend down throughout 2023 and 2024. The key factor determining whether these mortgage rates will drop in 2023 is the Federal Reserve’s ability to control inflation.

Over the past 12 months, the Consumer Price Index has risen by 3%. This growth, albeit slowing, indicates that the Fed’s efforts to combat inflation are yielding results. If this trend continues, we can expect mortgage rates to align with the forecasted downward trajectory.

Leveraging Home Equity with a HELOC

While awaiting the easing of mortgage rates, homeowners looking to finance significant purchases like home renovations can consider utilizing their home’s equity through a home equity line of credit (HELOC). HELOCs offer a flexible line of credit that allows you to borrow against the equity you’ve accumulated in your home.

Unlike a cash-out refinance, a HELOC provides access to funds without the need to replace your entire mortgage. Current HELOC rates are relatively low compared to other loan options like credit cards and personal loans. To find the right HELOC lender for your needs, you can explore some of our recommended options.

House Prices: What to Expect

The question on many homebuyers’ minds is whether house prices will come down soon. While there was a slight decline in home prices late last year, significant drops are unlikely to occur in 2023, even if a recession were to hit.

Fannie Mae researchers forecast a modest 3.9% increase in home prices for 2023. On the other hand, the Mortgage Bankers Association predicts no change in 2023 and a 1% increase in 2024. High mortgage rates have slowed down homebuying demand, putting downward pressure on prices. However, the historically low supply of homes available for sale is expected to prevent significant drops in prices.

House Prices and Recessions

During recessions, house prices typically decrease due to decreased affordability. Low demand forces sellers to lower their prices. However, the relationship between recessions and house prices is not always so straightforward, as various factors influence market dynamics.

Determining How Much Mortgage You Can Afford

Before embarking on your homebuying journey, it’s crucial to establish a clear understanding of how much mortgage you can comfortably afford. Our mortgage calculator can assist you in this process. By inputting different home prices and down payment amounts, you can determine your potential monthly payment and evaluate its compatibility with your overall budget.

Financial experts usually recommend that housing expenses should not exceed 28% of your pre-tax monthly income. This includes your entire monthly mortgage payment, including taxes and insurance. It’s important to remember that the lower the interest rate, the more you can borrow. Therefore, shopping around and getting pre-approved by multiple mortgage lenders is beneficial in securing the best rate while ensuring your borrowing aligns with your budget.

With the expected decrease in mortgage rates and the potential stabilization of house prices, the outlook for homebuyers is becoming brighter. Opportunities to own your dream home are on the horizon, so prepare yourself financially and make the most of this promising market situation.