WILL MORTGAGE RATES GO DOWN IN 2023?

Will Mortgage Rates go up or down in 2023?

With so many variables in the mortgage rate mix, it’s tricky to put a finger on which direction comes next. Rates have come down from the 20-year high of 7.08% in the fall of 2022, and many are optimistic we won’t see that again this year. Other economists believe there could be an uptick because inflation is not yet under control.

Mortgage rates, however large a part they play in a house payment and your overall financial position, are not the only factor to consider in buying a house. There are always purchases made to discover the same thing is on sale a week later. While not as substantial an amount as a long-term house payment perhaps, home buyers still have to evaluate their buying power, short-term objectives and long-term goals.

Mortgage Rates Over the Years

Mortgage rates are hovering in the 6% range, and you may think you missed the boat considering they were 3.2% early in 2022. However, factor in rates of previous decades, and it looks like a bargain to buy a house around Austin now. In the 1970s, rates began and ended in the 7-point-something range. The 1980s began there and ended close to 10%, where the 1990s began, ending around 8%. Thus, people have paid way more for housing than the somewhat safely predicted 6% range this year.

There’s a lot in the press about the Federal Reserve aka “the Feds” manipulating this or that which impacts all kinds of financial matters, including interest rates. While its job is “to promote the effective operation of the U.S. economy …”, what it does and when and/or why is generally out of the scope of the everyday American’s comprehension despite is inevitable impact on our buying power.

Mortgage Rates and the Best Time to Buy

In response to the question: “When is the best time to plant a tree?”, the first response is “10 or 20 years ago” and the second one is “today”. In many ways, once you have the resources and job stability to buy a house, today is a good time to begin building equity and enjoy living in your new home, while you go with the flow on the interest-rate-of-the-moment.

Depending on your investment goals and comfort level for risk, you can secure an adjustable rate mortgage (ARM) rather than a fixed rate mortgage. This way in 5, 7 or 10 years (or another pre-determined time), your mortgage rate will be adjusted to reflect “the going rate”, which could be higher or lower. So much can happen in a few years – or a day – which impacts the money structure – politics and policy, banks and lenders, wars and conflicts, natural disasters, unexpected events, and those “Feds” tweaking this and that.

Fixed Mortgage Rates

Mortgage rates on a 15-year fixed rate mortgage tend to be lower than its 30-year fixed rate cousin, which offers home buyers another possibility for a lower mortgage interest rate. The ARM will carry the lowest rate, but could inflict a big bite when it’s up for adjustment. On the other hand, if you are not planning to stay in this home for the long haul, then the ARM could work well in your favor to avoid a mortgage payment raise, yet make the property harder to sell with potential home buyers hesitant to commit to say an 8 or 9% rate, if they have risen. If rates have gone down, as they did coming into the 2000 years, you come out ahead. Additionally, there is a cap on the ARM, i.e., a percent limit on how much your rate can go up or down.

Additional Mortgage Options

There’s always the refinance option if rates sink, though generally it can cost you more in the long run. Your mortgage payment will go down, but the term of the loan goes up, and you could end up paying more. If the payment, however, is the motivating factor, this could help with making ends meet monthly in coming years. When you get a raise, consider paying down principal from the end of the mortgage to reduce payments over the term of the loan.

A general consensus seems to be that mortgage rates across this year are not going to soar or sink, and the 6-point-something is an acceptable place to be. Some bank or lending institution is willing to finance your house over decades, trusting you to repay a very large amount of money. You get to live there, enjoy the place, make improvements to suit your lifestyle and add value and build equity along the way.

Contact Us

So, if you are in the market to buy a house now in the Austin market, identify your ideal location, neighborhood, style, size, age and condition of home and call one of the real estate professionals at Habitat Hunters. The mortgage rates and asking prices should remain stable over the next several months.