Fannie Mae recently released updated projections for interest rates next year. An average of 4.500% for a 30 year fixed would be an improvement from what home buyers and homeowners have experienced since the jump in interest rates that that happened the second quarter of this year. We have to remember that this is just a prediction and many factors influence the direction of mortgage interest rates.
Fannie Mae is also predicting fewer homes will be available for people to buy. Lack of inventory causes home prices to push higher. If you are considering buying a home, you may not want to wait for potentially slightly lower rates in 2023.
Currently, I’m seeing sellers being more reasonable and the days homes having huge bidding wars seems to have cooled. If we see the level of inventory shrink, we could see the return of the dreaded sellers’ market.
My main point in this post is that I would not hold out for lower interest rates to buy a home if buying a home is something that you have in mind.
If you are considering buying a home, I strongly recommend getting preapproved as soon as possible – even if you are waiting until next year. Getting preapproved early allows you to put yourself in the best position for making a solid offer. It provides you with enough time to make any improvements you may need to your financial scenario (think credit, savings, employment, etc.). An experienced mortgage professional can help you create a solid game plan even if your home purchase plan is more than a year away.
If you are considering buying or refinancing a home located anywhere in Washington state, where I’m licensed and have been helping people with their mortgage needs for over twenty years, please contact me!
Rhonda – Do you think this help existing variable HELOC rates?
Hi Diane, that’s a great question. HELOC interest rates are generally attached to the “prime rate” which follows the Fed funds rate. In other words, whenever you hear that the Fed has increased, decreased or made no changes to interest rates; this is what directly impacts HELOC rates (and other debts often attached to prime, like credit cards, car loans, etc.).
The Fed has indicated they are planning on continuing to increase the Fed funds rate until inflation cools off so I’m afraid that HELOCs that are not fixed will continue to move higher. HELOCs generally do not have “caps” in place like adjustable rate mortgages (aka ARMs) to limit how much a rate can change or how often a rate can change. People who have HELOCs (or other debts attached to the prime rate) may want to consider refinancing the debt into a fixed rate product if they don’t like having their interest rates moving higher.
Thanks for the clear explanation – I need a little refresher once in awhile!
Hi Diane,
It can be confusing! Especially when the media often isn’t clear on mortgage rates and what they’re based on.