Fall 2023 Mortgage Rate Forecast: What Realtors Need to Know

September 27, 2023

As we gear up for the fall of 2023, it's paramount to have your arsenal of knowledge locked and loaded for client interactions. The pulse of the housing market, as we all know, rests on the ever-fluctuating landscape of mortgage interest rates. Let's dive into the hard facts and figures so you can steer your clients in the right direction.

Numbers don't lie, and here's what the data is telling us: 

​​Understanding Inflation and Fed Actions: The July 2023 inflation rate sits at 3.2%, having declined from the high of 8.5% in July 2022. Despite the drop, it's important to note that this rate still exceeds the Fed's 2% target. Keep in mind that the Federal Reserve's decision-making process involves a comprehensive evaluation of labor market conditions, inflation pressures, and international developments.

Impact of Fed's Rate Hike: At their July meeting, the Fed increased the benchmark federal funds rate by 25 basis points, establishing a range of 5.25% to 5.5%. This latest hike follows a series of increases that commenced in March 2022, resulting in the current rate reaching a 22-year high.

Rate Projection and Housing Considerations: The projected 5.6% peak rate for 2023 implies the likelihood of another rate hike by year-end. Notably, the housing market has experienced the effects of these tightening policies, with the average 30-year fixed-rate mortgage remaining above 6.5%, nearing 7% in early August.

Interpreting Diverse Expert Predictions: Insights from various experts provide a spectrum of predictions. For instance, Realtor.com economist Jiayi Xu envisions rates approaching 6% by year-end, while Fannie Mae projects an average 6.8% for the 30-year fixed-rate mortgage in Q3 2023. New American Funding CEO Rick Arvielo anticipates a significant rate decrease post the Fed's tightening cycle. Additionally, Transformational Mortgage Solutions' David Lykken foresees potential volatility, and Bank of America's Matt Vernon suggests a possible slight increase due to hints of another rate hike.

Navigating Refinancing and Market Trends: In a landscape where rates are higher than previous lows, carefully assessing refinancing options is crucial. The current 30-year fixed mortgage rate stands at 7.12%, nearly double its level in early 2022. The 15-year fixed-rate mortgage has surged to 6.55% from 2.43% in January 2022. In this context, adjustable-rate mortgages (ARMs) could offer a more cost-effective alternative, with the latest 5/1 ARM averaging 6.04%.

As you guide your clients this fall, your insights are instrumental in helping them decide whether it's the right time to buy or sell a home. Your expertise, coupled with these valuable insights, will empower them to make informed choices aligned with their financial aspirations and the current market dynamics.