Last year the Federal Reserve went to work to try to curb inflation and it took the form of a number of mortgage rate increases. Those rates peaked last October at just over 7%, a pretty drastic jump from the 3% rates homebuyers were enjoying at the beginning of 2022. Hopeful homebuyers took a hit to their purchasing power and many decided to press pause on their plans to buy a home.
Where We Are Now
Fast-forward to today and we’re beginning to see the rate of inflation starting to drop. As inflationary pressures ease, that should lead to lower mortgage rates in 2023. That’s great news if you’re a buyer hoping to jump back into the housing market. Any drop in mortgage rates helps boost your purchasing power by bringing down your monthly mortgage payment. The lower mortgage rates the experts are forecasting could be just what you need to get back in the game.
How Low Will Mortgage Rates Go?
While lower mortgage rates can open up a window of opportunity to purchase a home, experts caution that you shouldn’t expect rates to drop back to the record lows we saw in 2021. That’s not the rate buyers should expect. Greg McBride, Chief Financial Analyst at Bankrate explains, “I think we could be surprised at how much mortgage rates pull back this year. But, we’re not going back to 3 percent anytime soon because inflation is not going back to 2 percent anytime soon.”*
The Market Ahead
It’s important to have a realistic vision for what you can expect for mortgage rates this year. Buyers are still dealing with affordability, high mortgage rates, high home prices, and inflation. Added to that, inventory still remains low. And, if you’re in the market to buy, holding out for a 3% is a mistake.
Is Now the Right Time to Buy?
Historically, there have always been cycles in the market. Eventually there will be a correction. But, trying to time the market is a game for developers and investors, not for buyers of long-term primary residences. The best option for you, as a homebuyer, is to buy a home when you’re ready, instead of trying to predict the perfect time. Each potential buyer should consider their net household income and expenses to determine their buying capability.
The Bottom Line
Chasing an ideal interest rate is not the way to go when buying a home. It’s always an excellent time to buy a home if you’re in the market and financially able. If you’ve saved up for a down payment and you’re ready to buy, now is as good a time as any.
Consult with a lender to help you determine what you can qualify for and your real estate agent to help you find the perfect home.
Contact the Donnelly Group