Last year, the Federal Reserve took action to try to bring down inflation. In response to those efforts, mortgage rates jumped up rapidly from the record lows we saw in 2021, peaking at just over 7% last October. Hopeful buyers experienced a hit to their purchasing power as a result, and some decided to press pause on their plans.
Today, the rate of inflation is starting to drop. And as a result, mortgage rates have dipped below last years peak. Sam Khater, Chief Economist at Freddie Mac, shares:
While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.
Thats potentially great news if youre a buyer aiming to jump back into the housing market. Any drop in mortgage rates helps boost your purchasing power by bringing down your expected monthly mortgage payment. This means the lower mortgage rates experts forecast this year could be just what you need to reignite your homebuying goals.
While this opens up a window of opportunity for you, remember: you shouldnt expect rates to drop back down to record lows like we saw in 2021. Experts agree thats not the range buyers should bank on. Greg McBride, Chief Financial Analyst at Bankrate, explains:
I think we could be surprised at how much mortgage rates pull back this year. But were not going back to 3 percent anytime soon, because inflation is not going back to 2 percent anytime soon.
Its important to have a realistic vision for what you can expect this year, and thats where the advice of expert real estate advisors is critical. You may be surprised by the impact even a mild drop in mortgage rates has on your budget. If youre ready to buy a home now, todays market presents the opportunity to get a more affordable mortgage rate, find your dream home, and face less competition from other buyers.
Bottom Line
The recent pullback in mortgage rates is great news but if youre ready to buy now, holding out for 3% is a mistake. Work with a local lender to learn how todays rates impact your goals, and lets connect to explore your options in our area.
