Mortgage of the day, refinancing rateOctober 20, 2022

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Mortgage rates have calmed down over the past two weeks after some volatility at the start of the month. Average 30-year fixed rates are still significantly higher than a month ago, but they remain below 7%.

On Wednesday, the Mortgage Bankers Association released the latest data from its weekly mortgage applications survey, which showed mortgage applications fell to their lowest level since 1997.

To beat the high rates, more and more borrowers are opting for variable rate mortgages, which generally have lower rates than fixed rate mortgages.

“With rates at these high levels, ARM’s share increased to 12.8% of all applications, which was the highest share since March 2008,” said Joel Kan, vice president and corporate economist. deputy head of the MBA, in the press release. “ARM loans remain a viable option for borrowers who are still trying to find ways to lower their monthly payments.”

The current ARM 5/1 average weekly rate is 5.81%, according to Freddie Mac, more than a full percentage point lower than the average 30-year fixed rate.

Current Mortgage Rates Type of Mortgage Current Average Rate

This information was provided by Zillow. See more mortgage rates on Zillow Real Estate on Zillow Today’s Refinance Rate Mortgage Type Average Rate Today

This information was provided by Zillow. See more mortgage rates on Zillow Real Estate on the Zillow Mortgage Calculator

Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments:

mortgage calculator

$1,161 Your estimated monthly payment

Paying 25% more down payment would save you $8,916.08 in interest charges Lowering the interest rate by 1% would save you $51,562.03 Paying $500 more each month would reduce the term 146 month loan

By clicking on “More details”, you will also see the amount you will pay over the life of your mortgage, including the amount of principal versus interest.

Projection of mortgage rates for 2023

Mortgage rates started to recover from historic lows in the second half of 2021 and have risen more than three percentage points so far in 2022. They will likely remain near current levels for the remainder of 2022.

But many forecasts predict that rates will start falling next year. In their latest forecast, Fannie Mae researchers predicted that rates are currently peaking and that 30-year fixed rates will drop to 6.2% by the end of 2023.

The Mortgage Bankers Association also noted that a recession in the first half of 2023 could cause rates to drop even faster. He currently estimates that there is a 50% chance that a mild recession will materialize next year.

The decline in mortgage rates in 2023 depends on the Federal Reserve’s ability to control inflation.

Over the past 12 months, the consumer price index has increased by 8.3%. This is only a slight slowdown from the previous month’s numbers, meaning the Fed will likely need to continue to aggressively raise fed funds rates to bring prices down significantly.

As inflation slows, mortgage rates will likely start to come down as well. If the Fed acts too aggressively and engineer a recession, mortgage rates could fall further than currently forecast. But rates are unlikely to fall to the historic lows that borrowers have enjoyed over the past two years.

When will real estate prices go down?

House prices are starting to drop, but we probably won’t see huge drops, even in a recession.

The S&P Case-Shiller Home Price Index shows prices are still up year-over-year, although they fell on a monthly basis in July. Fannie Mae researchers expect prices to fall by 1.5% in 2023, while the MBA expects prices to rise by 2.8% in 2023 and 2.1% in 2024.

Skyrocketing mortgage rates have pushed many promising buyers out of the market, slowing demand for home purchases and putting downward pressure on home prices. But rates could start falling next year, taking some of that pressure off. The current supply of homes is also historically low, which will likely prevent prices from falling too far.

What happens to house prices in a recession?

House prices generally fall during a recession, but not always. When this happens, it’s usually because fewer people can afford to buy homes and weak demand forces sellers to lower their prices.

How much mortgage can I afford?

A mortgage calculator can help you determine how much you can afford to borrow. Play around with different house prices and down payment amounts to see how much your monthly payment might be, and think about how that fits into your overall budget.

As a general rule, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means that your total monthly mortgage payment, including taxes and insurance, should not exceed 28% of your pre-tax monthly income.

The lower your rate, the more you’ll be able to borrow, so shop around and get pre-approved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than your budget can comfortably support.

Molly Grace

mortgage reporter

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