2023 Mortgage Rate Predictions: All Eyes on Inflation

Another year has nearly passed, which means it’s time for the 2023 mortgage rate predictions.

I think we can all agree that our 2022 predictions were the worst on record. After all, mortgage rates had never doubled in a year before.

Just about everyone (or in fact, everyone) got 2022 totally wrong, though you can’t blame anyone either.

The year 2022 was the worst on record for mortgage rates, with the 30-year fixed rising from the high 2% range to higher than 7%.

Hopefully the year 2023 will be more favorable in terms of mortgage rates, though you can never be 100% sure.

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%

As always, we start with the Mortgage Bankers Association (MBA), using their monthly Mortgage Finance Forecast from late December (12/19/22).

Last year, they were way off, but then again, so was everybody else. Perhaps they’ll do a little better in 2023.

To their credit, they were the only group that predicted a 4% 30-year fixed by the end of 2022, whereas other forecasters stayed in the high 3% range.

For the first quarter of 2023, they expect the 30-year fixed to average a much higher 6.2%, which is basically close to where rates stand today.

A year ago, the MBA predicted a 3.2% 30-year fixed, to provide some context for how much higher rates are today.

And while 6.2% sounds pretty bad, it could have been worse, with the 30-year fixed surpassing 7% in November.

For subsequent quarters, the MBA actually expects things to improve further, with the 30-year fixed falling to 5.6% in Q2 2023.

Then on down to 5.4% in the third quarter and eventually 5.2% to close out the year 2023, which sounds not half-bad.

Remember, it appeared mortgage rates were headed toward 8% before improving recently as inflation concerns ebbed.

In 2024, they expect the 30-year fixed to average an even better 4.4%. That’s something to look forward to, and bolsters the argument to take out 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%

Now we’ll take a look at Fannie Mae’s 2023 mortgage rate predictions, pulled from their most recent Housing Forecast from mid-December (12/12/22).

They’ve got the 30-year fixed averaging a pricey 6.5% in the first quarter, before dipping to 6.4% in Q2 and improving further in the second half of 2023.

It eventually moves to 6.2% and then 6.0%, which is arguably above current levels. But I expect their forecast to be adjusted lower if inflation continues to improve.

Clearly they are playing things conservatively after being so very wrong in 2022. But again, everyone.

A year ago, Fannie didn’t see the 30-year fixed going higher than 3.4%. What a difference a year makes, eh?

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%

Brother Freddie Mac releases a quarterly forecast, which was last released in mid-October. As such, their predictions might be a bit higher than the rest.

I assume they’ll lower their estimates slightly for each quarter when they release their next update in

But as it stands, they see the 30-year fixed averaging 6.6% in the first quarter, 6.5% in Q2,6.4% in Q3, and finally down to 6.2% to close out 2023.

If they make positive changes in their next forecast, we might see their predictions drop by .2% in each quarter.

So that could look like 6.4%, 6.3%, 6.2%, and eventually 6% even. That sounds about right, as it would closely match Fannie Mae’s forecast.

We should know more in late January 2023 when the next update comes out.

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%

Next up is the National Association of Realtors, or NAR, which releases a monthly 
U.S. Economic Outlook.

Their latest report for December 2022 (12/13/22) reveals a big drop in mortgage interest rates.

They’ve got the 30-year fixed averaging 6.1% in the Q1 2023, then dropping to 5.7% in the second quarter.

That could certainly help re-energize the housing market during the traditional spring buying season.

After that, thing get even better, though only slightly. NAR expects the 30-year fixed to improve a further 10 basis points in each quarter, closing the year out at 5.5%.

Interestingly, Realtor.com has its own prediction, which says mortgage rates will average 7.4% in 2023, but trickle down to 7.1% by year’s end.

The Truth’s Mortgage Rate Predictions for 2023

First quarter 2023: 5.75%
Second quarter 2023: 5.75%
Third quarter 2023: 5.5%
Fourth quarter 2023: 5.0%

I think it’s safe to say that I got 2022 all wrong when it came to mortgage rates. So hopefully my 2023 predictions are a bit more accurate.

We’ve already seen evidence of mortgage rates trending in the right direction (down), and I believe that should continue into the new year.

Ultimately, inflation appears to be cooling after peaking a few months back and should fall back in line with historic norms.

This should allow mortgage lenders to continue lowering mortgage rates as more data is released to bolster that claim.

Of course, we won’t return to all-time lows or anywhere near it, but we should see much better rates in 2023.

As always, expect a bumpy ride throughout the year as events unfold and data is released. And pay extra attention to the difference in rates between lenders.

With mortgage rates no longer on sale, you need to shop more to ensure you get the best deal available.

In general, I expect market watchers and forecasters to err on the side of caution for their 2023 mortgage rate predictions.

While there is a glimmer of hope, you don’t want to be caught on the wrong side of things again.

Other Miscellaneous 2023 Mortgage Rate Predictions

Wells Fargo recently noted that it expects the 30-year fixed to average 6.16% in 2023, before easing a full percentage point to 5.16% in 2024.

Redfin said it expects the 30-year fixed to “gradually decline to around 5.8% by the end of the year.”

They believe rates will ease to 6% at the beginning of 2023, before “settling around 5.8% for the rest of the year.”

And the average 2023 homebuyer will snag a rate around 6.1%.

First American chief economist Mark Fleming said, “If inflation decelerates toward the Fed’s target range in the second half of 2023 as is currently expected, then it’s possible that mortgage rates may decline modestly in the latter half of the year.

He added that while mortgage rates will remain comparatively high relative to pandemic-era lows, stable and/or modestly lower mortgage rates could boost so-called housing market potential in 2023.

And while Zillow hasn’t provided an outright mortgage rate prediction, they did note that they continue to rule out the possibility of double-digit price declines for the nation as a whole in 2023 due in part to improving mortgage rates.

Read more: 2023 Mortgage and Real Estate Predictions

(photo: Marco Verch)

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