Come February, Americans expect the activity of Punxsutawney Phil, the climate-predictor rodent that looms over whether the winter will be long or short.
But weather isn’t the only thing we’re craving for expert forecasts now. Many of us are curious to see where mortgage rates will go in his second month of 2023.
In these cloudy days of snow, ice and frigid cold, we see a ray of hope: Freddie Mac report Mortgage interest rates continue to fall.benchmark 30 year fixed rate mortgage At the time of this writing, it averaged 6.13%, up 2.58% from a year ago, but down from last fall’s high of 7.08%. The Home Loan Bankers Association (MBA) also reported a surge in mortgage applications in the week ending Jan. 20. 7.0 percent over the previous week.
How will interest rates change in February? When will homebuy financing become more affordable? Will Punkstownie Phil be able to see his shadow? To get answers to all (except the latter), mortgage rates We spoke to a handful of experts who regularly predict the
Low 6% interest rate
After surveying industry insiders, the conclusion is pretty clear — mortgage rates likely won’t move significantly, if not dramatically, in the coming weeks. At best, it will be downward like a drifting snowflake.
“Unless the Fed unexpectedly dramatically raises the Fed Fund rate at its next meeting or receives a shockingly bad inflation report, it seems most likely that mortgage rates will stay flat or perhaps even slightly decline. ” said Rick Sharga, executive vice president of Market Intelligence. for atom. He expects February interest rates to average 6.0-6.25% for his 30-year mortgages and 5.25-5.50% for his 15-year mortgages.
Nadia Evangelou, Senior Economist and Director of Real Estate Research National Real Estate Association, about the same is expected for the second month of the year. “Mortgage rates will continue to fall in February,” she predicts. The average interest rate for fixed mortgages will be 6.2% compared to 5.5% for 15-year fixed rate mortgages.”
In general, bear in mind that mortgage rates have fallen slightly over the past few weeks, about 1 percentage point lower than when they peaked above 7% in November 2022. Put it down please.
“This is likely due to some back-to-back positive reports on inflation and expectations that the Federal Reserve may be able to ease quantitative tightening in the near future,” Shalga added.
Greg McBride, chief financial analyst at Bankrate, expects interest rate spreads to widen slightly this month.
“The average 30-year fixed mortgage rate is between 6% and 6.4%, and the average 15 year fixed mortgage rate It was between 5.2 percent and 5.5 percent during February,” he says. In light of this, this is a wider range as volatility is expected to increase.”
Selma Hepp, deputy chief economist at CoreLogic, believes mortgage rates will likely rise above 6% in February, but will gradually decline as the year progresses. “One of her reasons for this forecast is that the outlook for the U.S. economy could become clearer,” she notes. “Based on recent economic data, while the U.S. economy is slowing, more experts believe we are headed for a shallow recession with a soft landing.”
The Mortgage Bankers Association also forecasts a slightly more affordable interest rate environment in the near term, averaging 30-year fixed-rate mortgages. 6.2 percent YoY Q1 6.4 percent Fannie Mae predicted.
Guessing X-Factor
Of course, these interest rate forecasts are subject to change based on fluctuating conditions and wildcards that could make borrowing costs higher or lower than expected.
“Economic data suggest the economy is heading in the direction the Federal Reserve expects, but many uncertainties remain,” warns Hepp. “At this point, if Congress fails to reach consensus on raising the debt ceiling, the political dysfunction and deals around the debt ceiling could adversely affect both Treasury bonds and mortgage rates.”
It is always wise to expect the unexpected when it comes to factors that can affect rates. Sharga suggests to readers that a global pandemic, the impact of overly aggressive government stimulus measures, or similarly precedents by the Federal Reserve to counter the rampant inflation that these two events have caused. It reminds us that no one could have predicted the actions without
Inflation remains at 6.5%, but the worst may be over. Consumer Price Index (CPI) In fact, it dropped by 0.1% in December 2022. Still, it’s the first time in almost two years that inflation growth has finally fallen below the previous year. “This means that consumer prices are rising, but at a slower pace than they were a year ago. and he was 6.5%,” he adds Evangelou. “As a result, the Fed is likely to switch to even smaller rate hikes in February. These two factors could push mortgage rates down further in the coming months.”
“If the economy continues to slow and there is a geopolitical crisis, mortgage rates will go down,” McBride points out.
Mortgage rates are expected to fluctuate as the Fed’s hard line about rate hikes offsets over-optimism about lower inflation.
— Greg McBrideChief Financial Analyst at Bankrate
How should homebuyers react?
Now that we know where the experts are leaning in their interest rate expectations, it’s time to consider our next move.
“Given today’s house prices and mortgage interest rates, if you find a property you can afford to buy, don’t hesitate to go ahead,” Sharga suggests. “While some markets may see home prices fall in the short term, home prices have always risen over time and may continue to do so in the future.”
Remember: own a house Typically offering more financial security in the long run than renting, a 30-year fixed rate loan gives borrowers more certainty about housing costs and rent.
“Also, if mortgage rates go down, you can always refinance at a lower rate in the future and actually reduce your monthly housing costs. That’s highly unlikely for a rental property.” is,” says Sharga.
However, avoid the urge to act prematurely, especially if you haven’t done the math.
“Homebuyers have the ability to do proper due diligence at the time of purchase so they don’t rush into decisions that they don’t agree with or haven’t had enough scrutiny,” recommends McBride. “Once an offer is accepted, we compare mortgage quotes and apply to three different lenders to evaluate which one is the best deal.”
If fixed rate loans look intimidating, variable rate mortgage (ARM), carefully weigh the pros and cons.
“ARMs have lower interest rates than fixed-rate loans, which can mean substantial savings for borrowers. There is a lot of potential,” says Evangelou. “However, it should be noted that the ARM rate will change after the initial period. refinancing your home Before the expiration of the first term, so that there is no significant change in payments.”
Market timing is difficult
Pros agree that prospective borrowers should view mortgage predictions as educated guesses rather than certainties.
“Interest rate forecasts can inform your outlook, but the ultimate decision as to when to lock rates will be heavily influenced by other factors such as expected timing. close‘ says McBride. “Mortgage rates can suddenly fluctuate as events unfold, and the event doesn’t have to be something big. Even the movements of the It will soon disappear through the window.”
Hep gives those feelings a second.
“There will always be unpredictable black swans that can have destabilizing effects on the economy and the expected outlook,” she points out. “It’s important to understand what drives our forecast. Understanding that allows readers to observe those drivers as well. Precisely timing the market to get the best possible rate. Remember, it’s very difficult to measure.”