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What are experts predicting about mortgage rates? Feature Image
Posted on October 12, 2022 7 minute read

What are experts predicting about mortgage rates?


What's in this article?

What are mortgage rates right now?
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What are mortgage experts predicting?
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How should mortgage rates affect me?
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What do I need to consider before buying or refinancing?
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The right advice for buying a home or refinancing
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If you’re considering purchasing a new home, you’ve likely been paying attention to mortgage rates. 

Unless a homebuyer can make a cash offer to buy a home, mortgage rates can make a big difference toward when they buy and what kind of home loan product they use.

The housing market has been quite volatile over the last couple of years. Mortgage rates had incredible lows at the beginning of the pandemic, but, as expected, rate increases came about this year.

But where will mortgage rates go in the short-term and long-term? Are there more rate hikes coming? Or, as the real estate market likely grows colder, will the average rate also cool down?

As you consider your buying options, it helps to have some expert perspective and predictions about where mortgage rates are headed and whether or not this is the time to buy.

Let’s see where mortgage interest rates are today and what experts are saying about mortgage rates for the future.

What are mortgage rates right now?

At the beginning of September, Freddie Mac released its results from its market survey (PMMS or Primary Mortgage Market Survey), showing that 30-year fixed-rate mortgages (FRM) averaged 5.89 percent.

Sam Khater, the chief economist at Freddie Mac, acknowledged that mortgage rates had risen again as markets continued their efforts to manage “the prospect of more aggressive” monetary policies due to elevated inflation.

“Not only are mortgage rates rising,” he said, “but the dispersion rates had increased…” He suggests that borrowers might find benefits from searching out the best mortgage rates on the market.

Other facts from the Freddie Mac survey included:

  • The 30-year fixed-rate mortgage average of 5.89% as of Sept. 8th, 2022, up from the previous week when it had an average of 5.66%. Last year at the same time, the 30-year FRM averaged 2.88%.
  • The 15-year FRM averaged 5.16%, up from the previous week when the 15-year FRM averaged 4.98%. Last year, same time, the 15-year FRM averaged 2.19%.
  • Finally, 5-year Treasury-indexed hybrid ARMs (adjustable rate mortgages) averaged 4.64%, up from a week prior when it averaged 4.51%. Last year, it averaged 2.42%.

(Note: PMMS focuses on conventional, conforming home purchases (fully amortizing) for borrowers who offer a minimum of 20% down and have excellent credit.)

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What are mortgage experts predicting?

George Ratiu, the senior economist and manager of economic research at realtor.com, says that homebuyers should expect mortgage rates to remain in the 5-6% range over the next several weeks. 

He goes on to say that the elevation is a result of high inflation and the Federal Reserve-increased borrowing costs.

Rates being about 250 basis points higher compared to a year ago means median monthly payments will hover around $2000, which is about 60% higher than last year. However, since wages have risen at just 5% a year, this will prove a challenge to first-time buyers.

Ratiu adds that there is a silver lining. Houses are staying on the market longer now, pushing sellers to drop their asking prices and leaving more room for negotiation.

As we get into the autumn season, he says, the sales pace will likely slow further, and discounts will grow larger, giving buyers more opportunities for homes that fit their budgets.

Will mortgage rates go down?

Meanwhile, the Mortgage Bankers Association (MBA) released its mortgage finance forecast for the next two years.

Mike Fratantoni, senior vice president of MBA and its chief economist, acknowledged that mortgage rates had increased over the week prior as markets were still re-assessing the “path of monetary policy” and the “prospects for the economy” overall. 

However, he added that short-term expectations are that rates will “move and stay higher for longer.”

MBA estimates that an average contract 30-year fixed-rate mortgage (conforming, $647,200 or less) rose to 5.94% the week of Sept. 5th, the highest level since mid-June. In addition, jumbo loans (over $647,200) also increased from 5.32% to 5.46% during the same period.

Interest rates tend to reflect the Federal Reserve’s moves toward combating inflation, which is focused on bringing it down to 2%.

Fratantoni believes the recent economic data “will likely prevent any significant decline” in interest rates, but August’s robust job market data will likely “support housing demand.”

He also indicated no sign of “a rebound in purchase applications” as yet. Still, the job market data and increase in housing inventories would likely lead to an increase in purchase activity, eventually. 

How should mortgage rates affect me?

Even though mortgage rates continue to fluctuate right now because of economic uncertainty and ongoing inflationary pressures, the outlooks by experts suggest things will stabilize in the months ahead.

Latest projections indicate mortgage rates will hover in the low-to-mid 5% range at the start, then dip into the high 4% range by late next year.

This scenario would bring some welcome relief to the real estate market. 

Moreover, if what the experts say is accurate, the coming stability may make you feel more confident and secure in your decision to buy a home.

What do I need to consider before buying or refinancing?

When considering purchasing a home or refinancing your mortgage, the economic outlook, interest rates, and the state of the housing market are just some of the factors you need to consider.

Some other, just as important, considerations include:

  • Your debt-to-income ratio—one of the best ways to show you have sufficient means to buy a home or refinance.
  • Downpayment—if you are buying a new home, having 20% of the purchase price available as a downpayment can help avoid the need to pay private mortgage insurance.
  • Credit score—if your credit report isn’t where you need it to be, it may be worth spending time reducing your debt load before starting the home buying process.
  • Closing costs—refinancing and buying a new home will come with closing costs. Make sure you budget for these when calculating an application’s overall costs.
  • Monthly mortgage payments—work with your mortgage lender or use online tools to budget your monthly payments and ensure that you’ll be able to afford them 

Some experts recommend you talk to at least three lenders before deciding on one. Whether it’s three or 10, the point is to shop around with multiple lenders to find the one that will offer you the best options for your situation. 

The right advice for buying a home or refinancing

There is never a perfect time in the market to buy or refinance. 

Mortgage rates rise, inventory fluctuates, and financial markets will continue to evolve. When home prices are more affordable, you could have a personal finance issue that makes this time more challenging to buy.

The right time for a home loan is when it works out the best for you.  

If you focus too much on, for example, the federal funds rate percentage points, you might miss your opportunity to buy your ideal home or refinance to save money in the long run.

The best way to accurately assess your situation is to talk it over with an expert in the field.

Homefinity by homefinity.com deals with all different kinds of mortgage products and personal finances. 

Reach out to one of our loan officers and explain your situation. Together, we can determine if now is the right time to refinance or find your dream home.

Photo by Jessica Bryant