By: Paul Centopani
July 20, 2023 – 17 min read
https://themortgagereports.com/32667/mortgage-rates-forecast-fha-va-usda-conventional#loan-purpose
Mortgage rate forecast for next week (July 24-28)
Following a spike, interest rates had their biggest week-over-week drop since January.
The average 30-year fixed rate mortgage (FRM) fell from 6.96% on July 13 to 6.78% on July 20, according to Freddie Mac.
“Mortgage rates fell this week as economic data shows inflation cooled along with a moderation in US consumer spending. The latest inflation data eased pressure on bond yields, prompting mortgage rates to tick downward in recent days,” said Orphe Divounguy, senior macroeconomist at Zillow Home Loans. “Next week’s policy decision from the Federal Reserve is sure to bring more meaningful movements in rates.”
Will mortgage rates go down in August?
Mortgage rates fluctuated significantly to open 2023. In the first half, the average 30-year fixed rate went as low as 6.09% on Feb. 2 and climbed up to 6.79% on June 1, according to Freddie Mac.
Find your lowest mortgage rate. Start here (Jul 20th, 2023)
The range can be largely attributed to the Federal Reserve’s ongoing fight against inflation, juxtaposed with uncertainty in the banking sector sparked by Silicon Valley Bank’s collapse. However, with duress permeating the financial market and the fallout from U.S. debt ceiling talks, the Fed may continue making hikes to bring interest rates down.
With the economy likely heading into a recession, it’s possible we’ve already seen the peak of this rate cycle. Of course, interest rates are notoriously volatile and could tick back up on any given week.
Experts from Beeline, CJ Patrick Company, National Association of Realtors, and others weigh in on whether 30-year mortgage rates will climb, fall, or level off in August.
Expert mortgage rate predictions for August
Ralph DiBugnara, president at Home Qualified
Prediction: Rates will rise
“I believe we will see the 30- and 15-year fixed mortgage rates increase based on the perception that the Fed will be raising rates at least two more times in 2033. Settling at 6.99% on 30-year and 6.25% on 15-year. Rates seem to be trending up over the last few weeks based mostly on the Fed holding off rate raise but promising more raises. With anticipation of the raise, I don’t see any huge move until the Fed speaks and clarifies where they currently see the United States trending for the remainder of the year.
Danielle Hale, chief economist at Realtor.com
Prediction: Rates will fall
“With mortgage rates at the upper end of their 2023 range headed into August, they are likely to drift lower in the month ahead. The June CPI data issued in mid-July showed striking improvement in inflation trends. While this is unlikely to deter the Fed from hiking its short-term rate at the end of July, progress on inflation could help the Fed sound more confident that its hoped-for economic soft-landing is in reach.”
“An optimistic tone from the Fed would set the stage for a gradual improvement in mortgage rates into August. Of course, uncertainties remain. The strong improvement in June CPI has raised expectations for the July data due out in mid-August. A smaller than projected improvement in inflation data mid-month could cause mortgage rates to reverse course and climb in the second half of August while a second lower reading could help accelerate the pace of decline.”
Jess Kennedy, co-founder and COO at Beeline
Prediction: Rates will fall
“While rates may tick up early in the month as a reaction to the Fed’s anticipated rate increase in late July, it is entirely possible that we actually see an interest rate drop in August. There is a large spread between the 10-year Treasury bond and the 30-year fixed mortgage rate — well above the average of 170 basis points (bps). In June, the gap was around 320 bps. That’s due to uncertainty in many areas — recession anxiety, jobs reports, Ukraine, inflation, etc. At some point, the gap between the 30-year fixed mortgage rate and 10-year will narrow and if the Fed continues to signal a slowdown or stop to interest rate hikes, August could be a time that we see rates drop a little.
Odeta Kushi, deputy chief economist at First American
Prediction: Rates will moderate
“Mortgage rates will likely zig-zag over the next month, but within a narrow range. The latest Consumer Price Index (CPI) data shows that CPI rent growth has peaked and started to cool, which should drag overall inflation lower. Further disinflation should support downward pressure on mortgage rates.”
“However, if the July FOMC meeting takes on a more hawkish tone that prompts the market to adjust expectations, it’s possible that rates may move higher. If there are no big surprises in the economic data or the Fed’s tone between now and the end of August, and inflation continues to decelerate, we may see mortgage rates drift lower.”
Jessica Lautz, deputy chief economist at National Association of Realtors
Prediction: Rates will fall
“The Fed should react positively to the recent ease in inflation. If so, this will have a ripple effect into the mortgage market. Even as the 30-year fixed recently hit an eight-month high and is brushing 7%, there are hopeful signs rates will start to fall for home buyers in the coming months.”
Rick Sharga, president and CEO at CJ Patrick Company
Prediction: Rates will moderate
“Mortgage rates in August are likely to stay within the same 6.5-7.0% range that they’ve been in for the past couple of months, maybe edging toward the lower end of that range assuming that the Federal Reserve doesn’t do anything unexpected at its July meeting.
This month’s better than expected inflation numbers coupled with a job market that appears to be softening a little bit provide hope that the Fed will stop raising rates soon, allowing mortgage rates to fall slowly but steadily for the remainder of the year.”
Mortgage interest rates forecast next 90 days
As inflation ran rampant in 2022, the Federal Reserve took action to bring it down and that led to big interest rate growth. The average 30-year fixed-rate mortgage more than doubled within the course of the year.
Find your lowest mortgage rate. Start here (Jul 20th, 2023)
As inflation gradually cools, the size of the Fed’s rate hikes are coming down. Additionally, the likelihood of a recession has many experts believing mortgage interest rates will move within a tighter range compared to the spikes we saw in early 2022.
Of course, rates could rise on any given week or if another global event causes widespread uncertainty in the economy.
Mortgage rate predictions for 2023
The 30-year fixed-rate mortgage averaged 6.78% as of July 20, according to Freddie Mac. All five major housing authorities we looked at projected 2023’s third quarter average to finish below that.
National Association of Realtors sits the low end of the group, predicting the average 30-year fixed interest rate to settle at 6.1% for Q3. Meanwhile, National Association of Home Builders and Wells Fargo have the highest forecasts of 6.48% and 6.6%, respectively.
Housing Authority
30-Year Mortgage Rate Forecast (Q3 2023)
National Association of Realtors
6.10%
Fannie Mae
6.20%
Mortgage Bankers Association
6.20%
National Association of Home Builders
6.48%
Wells Fargo
6.60%
Average Prediction
6.32%
Current mortgage interest rate trends
Mortgage rates decreased for the first time in four weeks as inflation continued to come down.
The 30-year fixed rate dropped from 6.96% on July 13 to 6.78% on July 20. The average 15-year fixed mortgage rate also decreased, going from 6.30% to 6.06%.
Get started shopping for mortgage rates (Jul 20th, 2023)
Month
Average 30-Year Fixed Rate
June 2022
5.52%
July 2022
5.41%
August 2022
5.22%
September 2022
6.11%
October 2022
6.90%
November 2022
6.81%
December 2022
6.36%
January 2023
6.27%
February 2023
6.26%
March 2023
6.54%
April 2023
6.34%
May 2023
6.43%
June 2023
6.71%
Source: Freddie Mac
After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 14-year high in 2022. Many experts and industry authorities believe they will follow a downward trajectory in 2023. Whatever happens, interest rates are still below historical averages.
Dating back to April 1971, the fixed 30-year interest rate averaged around 7.8%, according to Freddie Mac. So if you haven’t locked a rate yet, don’t lose too much sleep over it. You can still get a good deal, historically speaking — especially if you’re a borrower with strong credit.
Just make sure you shop around to find the best lender and lowest rate for your unique situation.
Mortgage rate trends by loan type
Many mortgage shoppers don’t realize there are different types of rates in today’s mortgage market. But this knowledge can help home buyers and refinancing households find the best value for their situation.
Find your lowest mortgage rate. Start here (Jul 20th, 2023)
Following are 3-month mortgage rate trends for the most popular types of home loans: conventional, FHA, VA, and jumbo.
June 2023
May 2023
April 2023
Conforming Loan Rates
6.78%
6.72%
6.45%
FHA Loan Rates
6.67%
6.67%
6.38%
VA Loan Rates
6.53%
6.49%
6.10%
Jumbo Loan Rates
6.99%
6.80%
6.49%
Source: Black Knight Originations Market Monitor Report
Which mortgage loan is best?
The best mortgage for you depends on your financial situation and your goals.
For instance, if you want to buy a high-priced home and you have great credit, a jumbo loan is your best bet. Jumbo mortgages allow loan amounts above conforming loan limits, which max out at $726,200 in most parts of the U.S.
On the other hand, if you’re a veteran or service member, a VA loan is almost always the right choice. VA loans are backed by the U.S. Department of Veterans Affairs. They provide ultra-low rates and never charge private mortgage insurance (PMI). But you need an eligible service history to qualify.
Conforming loans and FHA loans (those backed by the Federal Housing Administration) are great low-down-payment options.
Conforming loans allow as little as 3% down with FICO scores starting at 620. FHA loans are even more lenient about credit; home buyers can often qualify with a score of 580 or higher, and a less-than-perfect credit history might not disqualify you.
Finally, consider a USDA loan if you want to buy or refinance real estate in a rural area. USDA loans have below-market rates — similar to VA — and reduced mortgage insurance costs. The catch? You need to live in a ‘rural’ area and have moderate or low income to be USDA-eligible.
Mortgage rate strategies for August 2023
Mortgage rates displayed their famous volatility to open 2023. Ongoing inflation battles and Fed hikes drove growth, then uncertainty in the banking sector led to downtrends.
Find your lowest mortgage rate. Start here (Jul 20th, 2023)
At its May meeting, the Fed made a relatively small hike amid the banking turmoil. Then in June, the central bank held off on another hike, preferring to see how the economy reacted to the debt ceiling agreement and the decreasing inflation rate. Going forward, the FOMC said it would adjust its policies as necessary — which could mean additional hikes or possibly none at all.
Here are just a few strategies to keep in mind if you’re mortgage shopping in the coming months.
Be ready to move quickly
Indecision can lead to failure or missed opportunities. That holds true in home buying as well.
Although the housing market is becoming more balanced than the recent past, it still favors sellers. Prospective borrowers should take the lessons learned from the last few years and apply them now even though conditions are less extreme.
“Taking too long to decide to make an offer can lead to paying more for the home at best and at worst to losing out on it entirely. Buyers should get pre-approved (not pre-qualified) for their mortgage, so that the seller has some certainty about the deal closing. And be ready to close quickly — a long escrow period will put you at a disadvantage.
And it’s definitely not a bad idea to work with a real estate agent who has access to “coming soon” properties, which can give a buyer a little bit of a head start competing for the limited number of homes available