Predicting Mortgage Rates: What to Expect Between Now and the End of the Year with Affordable Interest Mortgage - Affordable Interest Mortgage

Predicting Mortgage Rates: What to Expect Between Now and the End of the Year with Affordable Interest Mortgage

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Introduction:

The state of mortgage interest rates is a topic of great interest to homeowners, prospective buyers, and real estate enthusiasts alike. With the housing market constantly evolving, understanding the trajectory of mortgage rates can have a significant impact on your financial decisions. In this blog post, we will explore the factors influencing mortgage rates and make our predictions on what you can expect to happen between now and the end of the year.

Current Market Overview

To comprehend the future movement of mortgage rates, it’s crucial to examine the current market conditions. As of the time of writing, the overall economic landscape suggests several key indicators that influence interest rates.

FED’s Policy – Inflation – CPI (Consumer Price Index) – Employment – Supply & Demand

1. Federal Reserve Monetary Policy

One of the most influential factors affecting mortgage rates is the monetary policy set by the Federal Reserve (Fed). The Fed has the authority to adjust short-term interest rates, which indirectly impacts mortgage rates. As of now, the Federal Reserve has been carefully monitoring inflation and economic growth, and their decisions on interest rate adjustments will play a pivotal role in the direction of mortgage rates.  Beginning in 2022 the Feds started raising rates to curb inflation and have done so 11 times. 

2. Inflation Outlook

Inflation is another key driver of mortgage rates. Rising inflation erodes the purchasing power of the dollar, leading to increased borrowing costs. To combat inflation, central banks often raise interest rates. However, the Federal Reserve has signaled its commitment to maintaining a caution stance to support economic recovery, suggesting that interest rates may remain relatively stable in the near term.  When the Fed’s look at inflation they look at the CPI #’s over the last 12 months and average those numbers.  Since the CPI was 7.5% – 9.1% for most of 2022 we are seeing higher CPI #s which indicates higher Inflation #’s.  I believe we will start to see these numbers come down by years end. 

3. Economic Recovery and Employment

The state of the economy and employment levels also impact mortgage rates. A robust economy and low unemployment rates typically coincide with higher mortgage rates. Conversely, a sluggish economy and high unemployment rates tend to push rates lower. While the economy has shown signs of recovery, it is essential to monitor economic data and labor market indicators for any potential shifts in interest rates.  We have benefited from low unemployment numbers, which may be a reason we are not in a recession.  There is mixed opinion from the financial experts as to whether unemployment will stay low.

4. Housing Market Trends

The housing market’s performance is closely linked to mortgage rates. Historically low rates have contributed to increased demand, driving up home prices in many areas. Supply of homes still does not meet Demand.  Even with the increase in rates there are still not enough homes available for sale to meet the demand.  Over 73% of homes put on the market sell within 30 days and 37% are selling for over asking price.  However, the pace of price growth is beginning to slow down for some areas and price ranges. Homes that are sitting are those that need some TLC.  We are also seeing an increase in building permits.  This could help fill the demand for homes and help satisfy the demand.  If this trend continues, it could alleviate some pressure on mortgage rates, potentially resulting in a more stable rate environment.

5. Mortgage Rate Projections 

While it is challenging to predict the precise trajectory of mortgage rates, industry experts and economists provide projections based on current trends and factors. These projections serve as a guide for homeowners and prospective buyers.  With the above factors we see the housing market as being steady and home values continuing to increase, but not at the 11% – 13% as in 2022 but at a more normal appreciation rate of 4-5%.  We also see, due to the Inflation Rate declining, rates will also start to decline in the 3rd & 4th quarter of 2023. 

The Federal Reserve’s commitment to supporting the economy and potential moderation in inflationary pressures will act as stabilizing factors. However, it is crucial to monitor economic indicators, labor market conditions, and any unexpected developments that may impact mortgage rates.

Conclusion:

Predicting the future movement of mortgage rates is a complex task, but with Affordable Interest Mortgage, you can be confident in our dedication to providing affordable mortgage solutions. By considering factors such as the Federal Reserve’s monetary policy, inflation outlook, economic recovery, housing market trends, and personalized mortgage rate projections, Affordable Interest Mortgage offers various loan options and valuable guidance to homeowners and prospective buyers. When partnering with Affordable Interest Mortgage, you can navigate the mortgage landscape with confidence, knowing that we are committed to helping you find the most affordable interest rates and the best loan program for your unique financial situation.

Disclosures:  NMLS 298191, Regulated by Dora, Equal Credit Lender AZ NMLS MB1021756, WY MBL 4594

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