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 yearâ€™s peak. Sam Khater, Chief Economist at Freddie Mac, shares:
â€œWhile mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.â€
Thatâ€™s potentially great news if youâ€™re 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 shouldnâ€™t expect rates to drop back down to record lows like we saw in 2021. Experts agree thatâ€™s not the range buyers should bank on. Greg McBride, Chief Financial Analyst at Bankrate, explains:
â€œI think we could be surprised at how much mortgage rates pull back this year. But weâ€™re not going back to 3 percent anytime soon, because inflation is not going back to 2 percent anytime soon.â€
Itâ€™s important to have a realistic vision for what you can expect this year, and thatâ€™s 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 youâ€™re ready to buy a home now, todayâ€™s market presents the opportunity to get a more affordable mortgage rate, find your dream home, and face less competition from other buyers.
The recent pullback in mortgage rates is great news â€“ but if youâ€™re ready to buy now, holding out for 3% is a mistake. Work with a local lender to learn how todayâ€™s rates impact your goals, and letâ€™s connect to explore your options in our area.