Could Mortgage Rates Fall from Here?

Could Mortgage Rates Fall from Here?

Over the course of 2022, climbing interest rates have softened buyer demand, forcing the market back to somewhat of a normal pace. But the question everyone wants to know is: will they continue to climb? And if so, how high?
Fortunately, many experts believe that interest rates won’t go much higher from here. However, they also don’t count on them dropping significantly anytime soon. The issue right now is that mortgage loans are dealing with rising inflation, which makes rates higher. The Federal Reserve is trying to halt inflation, through raising the cost of borrowing. Once inflation does start to fall, that should also lead to interest rates dropping.
In a recent article from Forbes, the Mortgage Bankers Association (MBA) stated that “Given the weaker outlook for growth, we continue to estimate a 50% likelihood of a mild recession over the next 12 months. If this materializes with a recession in the first half of 2023, the employment rate is expected to reach 5.5% by the end of 2023, and mortgage rates would fall around 30 basis points from the baseline forecast level [of 5.2%].” This is good and bad news, as a recession typically has a negative impact on overall economic growth, but a positive impact on mortgage rates.

Keeping Current Matters gathers data from a number of reputable sources in real estate. In their chart, you can see how past recessions have brought mortgage rates down. Given the current economic outlook for the next year, there’s a decent chance that a mild recession could play out. If so, then there’s also a pretty good chance mortgage rates have reached their peak, or at least close to it, and may slightly come down over the next year.

If you’ve been on the fence about making a move, just remember this saying: marry the house, date the rate. In other words, knowing that interest rates won’t go much higher, if at all, it’s a really great time to find your new home. There’s less competition, more inventory on the market, and if rates drop in the next year or two, you can refinance! But in the meantime, you’ll be building more equity and increasing your net worth. Whether you’re ready to buy, on the fence, or just have some questions about the market, give one of our agents a call! They'd love to chat.

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