As another year comes to a close, experts are making their predictions for mortgage rates in 2023. It’s generally agreed upon that the predictions for 2022 were incorrect, as mortgage rates ended up doubling in a way they never had before. This caused the 30-year fixed mortgage rate to reach a record high of over 7% in 2022, after starting the year in the low 2% range. While it is hoped that 2023 will bring more favorable mortgage rates, it is difficult to say for certain what will happen.
MBA 2023 Mortgage Rate Predictions
| First quarter 2023 | 6.2% |
| Second quarter 2023 | 5.6% |
| Third quarter 2023 | 5.4% |
| Fourth quarter 2023 | 5.2% |
The Mortgage Bankers Association (MBA) released their monthly Mortgage Finance Forecast in December 2022, which predicted that the 30-year fixed mortgage rate will average 6.2% in the first quarter of 2023. This prediction is higher than the MBA’s prediction from the previous year, when they expected a 3.2% rate for the 30-year fixed mortgage. In the past, the MBA has not always been accurate in their predictions, but they were the only group that correctly forecasted a 4% rate for the 30-year fixed mortgage by the end of 2022, while other organizations predicted rates in the high 3% range.
The MBA predicts that the 30-year fixed mortgage rate will decrease in the coming quarters, falling to 5.6% in the second quarter of 2023, 5.4% in the third quarter, and 5.2% by the end of the year. These predictions are better than the rate of 6.2% expected for the first quarter of 2023, and are an improvement from November 2022 when rates were predicted to surpass 7%. In 2024, the MBA expects the 30-year fixed mortgage rate to average 4.4%. These predictions suggest that it may be a good idea to consider an adjustable-rate mortgage in the meantime.
Fannie Mae 2023 Mortgage Rate Forecast
| First quarter 2023 | 6.5% |
| Second quarter 2023 | 6.4% |
| Third quarter 2023 | 6.2% |
| Fourth quarter 2023 | 6.0% |
Fannie Mae recently released their Housing Forecast for 2023, which predicts that the 30-year fixed mortgage rate will average 6.5% in the first quarter, before decreasing to 6.4% in the second quarter and continuing to decrease in the second half of 2023. It is expected to eventually reach 6.2% and then 6.0%. These predictions are higher than the current mortgage rates, but it is likely that their forecast will be adjusted lower if inflation continues to decline.
A year ago, Fannie Mae did not expect the 30-year fixed mortgage rate to exceed 3.4%.
Freddie Mac 2023 Mortgage Rate Predictions
| First quarter 2023 | 6.6% |
| Second quarter 2023 | 6.5% |
| Third quarter 2023 | 6.4% |
| Fourth quarter 2023 | 6.2% |
Freddie Mac releases a quarterly forecast, which was last released in October 2022. Their predictions for the 30-year fixed mortgage rate for the first three quarters of 2023 are 6.6%, 6.5%, and 6.4%, respectively. The prediction for the fourth quarter is 6.2%. It is likely that these predictions will be adjusted slightly downward when the next forecast is released in January 2023. The adjustments could be around 20 basis points for each quarter, resulting in predictions of 6.4%, 6.3%, 6.2%, and eventually 6%. These adjusted predictions would be similar to the ones made by Fannie Mae.
The next update from Freddie Mac will be released in late January 2023.
NAR 2023 Mortgage Rate Outlook
| First quarter 2023 | 6.1% |
| Second quarter 2023 | 5.7% |
| Third quarter 2023 | 5.6% |
| Fourth quarter 2023 | 5.5% |
The National Association of Realtors (NAR) released their monthly U.S. Economic Outlook report for December 2022, which predicts a significant drop in mortgage interest rates for the first half of 2023. According to the report, the 30-year fixed mortgage rate will average 6.1% in the first quarter and 5.7% in the second quarter.
These lower rates may help to boost the housing market during the spring buying season. NAR predicts that the rate will continue to decrease by 10 basis points in each quarter, reaching 5.5% by the end of 2023. In contrast, Realtor.com has a different prediction, stating that mortgage rates will average 7.4% in 2023, but will decrease to 7.1% by the end of the year.
Conclusion
I was wrong about mortgage rates in 2022, so I hope my predictions for 2023 are more accurate. We’ve already seen that rates are decreasing, and I believe this trend will continue into the new year. This could allow mortgage lenders to lower their rates further as more data becomes available. While rates won’t return to all-time lows, they should be better in 2023.
However, the year may be volatile with events and data releases affecting rates. It’s important to compare rates between lenders and shop around to get the best deal. Market watchers and forecasters are likely to be cautious in their predictions for 2023. While there is some hope, it’s important to be prepared for any potential changes. Inflation appears to be decreasing and should return to typical levels.
Other Miscellaneous 2023 Mortgage Rate Predictions
Wells Fargo expects the 30-year fixed mortgage rate to average 6.16% in 2023 and decrease to 5.16% in 2024. Redfin predicts that the rate will gradually decline to around 5.8% by the end of 2023, and the average home buyer in 2023 will secure a rate around 6.1%. First American’s Chief Economist, Mark Fleming, said that if inflation slows down as expected in the second half of 2023, mortgage rates may modestly decrease in the latter half of the year.
He added that while rates will remain relatively high compared to the lows seen during the pandemic, stable or slightly lower rates could improve the potential of the housing market in 2023. Zillow has not provided a specific mortgage rate prediction, but they have noted that they do not expect nationwide price declines of 10% or more in 2023, partly due to improving mortgage rates.