Great news for prospective homebuyers and those looking to refinance! Despite minimal changes in June, mortgage rates, which had surpassed the 6.5% mark in late May, presented some minor dips that motivated borrowers eagerly took advantage of.
According to Freddie Mac, the national average for a 30-year fixed-rate mortgage began June at 6.79% and ended the month at 6.71%, a decrease of eight basis points. While housing market analysts anticipate continued elevated rates due to economic uncertainty and the Federal Reserve’s focus on curbing inflation, they believe that rates peaked last fall and will gradually decline later this year, barring any unforeseen surprises.
The tug-of-war between high inflation and the Federal Reserve’s efforts to control it often indirectly leads to higher long-term mortgage rates. Although the Fed did not raise the federal funds rate in its June meeting, it did revise the projected peak rate for 2023 to 5.6% from the previous 5.1% target. The Fed’s current policy rate is in the 5% to 5.25% range.
While more rate hikes could impact the 30-year fixed mortgage rate, which has been inching closer to 7% in recent weeks, the market’s previous expectation of rate cuts by the end of 2023 may need adjusting. However, the Fed’s decision-making will be influenced by labor market conditions, inflation pressures, financial developments, and international factors.
Despite the Fed’s hawkish outlook, experts express their frustration, arguing that there is no need to raise interest rates when inflation has already slowed to 4%. The Fed will continue to monitor economic data to determine the stance of their monetary policy at the July meeting.
If you’re navigating the housing market during this uncertain economic climate, experts recommend being prepared to seize any dips in rates. However, it’s crucial to have a specific property that aligns with your budget before moving.
What can we expect in the coming months? Various experts predict a gradual decline in mortgage rates, with some forecasting rates near 6% by the end of the year and even lower in 2024. While the rates may still be higher than in previous years, refinancing opportunities could emerge later in 2023.
Refinancing in 2023 might not be the optimal choice for everyone, especially if you secured a mortgage during the record-low rates of 2020 and 2021. However, whenever rates experience a retreat, more individuals tend to apply for mortgages. Although rates remain considerably higher than a year ago, purchase and refinance applications have been sluggish, maintaining levels similar to those in the 1990s.
Before rushing into refinancing, carefully consider your options. While a lower monthly payment may seem appealing, refinancing could lengthen the loan term and result in higher interest costs. Make use of mortgage refinancing calculators to determine potential savings and consider the impact of closing costs and the breakeven point.
As of July 2023, the average mortgage rate for a 30-year fixed loan stands at 7.12%, while the average for a 15-year fixed-rate mortgage is 6.55%. For those seeking more affordable options, adjustable-rate mortgages (ARMs) may be worth considering, with the latest average for a 5/1 ARM at 6.04%.
When it comes to refinancing rates, the current averages for various mortgage types are as follows: 30-year fixed at 7.21%, 15-year fixed at 6.75%, 30-year jumbo at 7.32%, and 5/1 ARM at 5.96%.
While rates have fluctuated throughout the beginning of 2023, they have shown stability in recent weeks borrowers
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