Mortgage Rates Next 90 Days: Will Rates Decline?

In this article, we’ll explore the latest predictions for mortgage rates over the next 90 days. During the upcoming three months, it is expected that mortgage rates will persist within the range of 6.35% to 6.89%. For prospective homebuyers and current homeowners, keeping a close eye on mortgage rates is crucial in determining when to make a move in the housing market.

Mortgage Rates Forecast for Next 90 Days

The latest Fed meeting on February 2, 2024, revealed no changes to interest rates, leaving financial markets to interpret the Fed’s stance as indicative of a prolonged period of restrictive monetary policy. This has implications for economic growth and inflation in the short term.

Despite speculation about potential changes in Fed policy, it’s crucial to note that long-term mortgage rates have already retreated significantly from their 22-year highs in October 2023. While not reaching historical lows, current mortgage rates are comparable to those of the previous year.

Examining historical data, it becomes apparent that the federal funds rate’s impact on long-term mortgage rates is not always direct. Even if the Fed were to cut rates, recent examples show that mortgage rates can behave independently, influenced by various market factors.

Technical factors, such as changes in Mortgage-Backed Securities (MBS) supply and demand, play a pivotal role in shaping current mortgage rate trends. Issues with banks and a potential recession impacted MBS demand, contributing to the rise and fall of mortgage rates.

Several elements, including yield spreads, Treasury bond supply, and recession concerns, contributed to the considerable decline in mortgage rates over the last few months. Understanding these factors provides insights into the complex dynamics affecting mortgage rate movements.

Mortgage Rate Forecast Analysis

The current economic scenario indicates a robust and resilient market. The economy is powering along, characterized by tight labor markets and stable wages. However, this economic strength poses challenges for further progress on core inflation. The service prices also remain at a level that may make advancing core inflation more challenging than the preceding months.

The key driver for potential shifts in mortgage rates is inflation. The data suggests that while the last six months have shown positive steps, inflation hasn’t quite reached the Federal Reserve’s 2% core PCE goal. The forecast anticipates that by March, core PCE will have been around the 2% mark for about nine months, potentially prompting the Fed to consider a move. However, there is a cautious note about the central bank’s preference for a more extended period of low inflation, possibly close to a year.

Considering the current economic landscape and inflation trends, Hsh.com provides a detailed forecast for mortgage rates over the next nine weeks. The average offered rate for a conforming 30-year fixed-rate mortgage, as reported by Freddie Mac, is expected to range between 6.35% and 6.89%. Meanwhile, for a hybrid 5/1 ARM, the forecast suggests a range of 5.85% to 6.40%.

While analyzing the potential for rate changes, it’s highlighted that the upside for rates seems nearly as limited as the downside. Technical factors and unforeseen external surprises could influence mortgage rates, but there’s uncertainty regarding their impact over the forecast period.

The forecast comes with an expiration date of March 29, 2024, coinciding with the opening day of the major league baseball season. This analogy adds a touch of anticipation, likening the outcome of the forecast to the possibilities in a baseball game – a foul ball, a home run, or a strikeout. It prompts readers to check back and assess whether the forecast proved accurate or faced unexpected outcomes.

What Were Mortgage Rate Predictions for Year End 2023?

The National Association of Realtors (NAR) senior economist and director of forecasting, Nadia Evangelou, predicted that if inflation continues to slow down, mortgage rates may stabilize below 6% by the end of 2023. The Mortgage Bankers Association (MBA) expects that 30-year mortgage rates will end in 2023 at 5.2%.

On the other hand, Freddie Mac forecasts that the average 30-year mortgage will start at 6.6% in Q1 2023 and end at 6.2% in Q4 2023. Therefore, housing market stakeholders are keeping a watchful eye on the data-dependent Fed for signals on whether policymakers will maintain or cut the benchmark rate or resume more aggressive tightening measures.

What’s the best strategy for prospective homebuyers in this uncertain economic climate? “Be prepared to jump on a dip in rates,” says Robert Frick, the corporate economist at Navy Federal Credit Union. “But only if you have a property in mind that fits your budget.”

According to Compass U.S. region president, Neda Navab, there have been signals that mortgage interest rates may be at or near their peak, given recent encouraging news around inflation and a corresponding drop in the U.S. Treasury yields that help set mortgage rates.

A sustained drop could push mortgage rates into the 5% range late in the second quarter or in the second half of 2023, but that’s definitely not guaranteed. Mortgage rates are likely to move in the 6% to 7% range over the next few weeks, which continues to pose a significant challenge to affordability, according to Realtor.com economist, Jiayi Xu.

The fight over raising the debt ceiling is likely to drag into the summer, and mortgage borrowers should expect rate volatility as a result, warns Zillow Home Loans senior macroeconomist, Orphe Divounguy. This rate volatility could mean that prospective homebuyers should not wait for mortgage rates to decrease further, as they may start increasing again soon.

To sum up, it is anticipated that the mortgage rates in the upcoming 90 days will fluctuate, with marginal rises or drops contingent upon the Federal Reserve’s efforts to curb inflation. Those intending to buy or refinance a home should remain alert for any favorable changes in the rates, provided they have a property in sight that meets their financial plan. Additionally, they should keep a close tab on the data-based actions of the Fed to gauge whether they will retain or diminish the benchmark rate or adopt more forceful measures to tighten the market.

Home loan rates are being influenced by high inflation and the Federal Reserve’s actions to restrain it, leading to fluctuating rates. The best strategy for prospective homebuyers is to be prepared to jump on a dip in rates, but only if they have a property in mind that fits their budget. Experts predict that mortgage rates may stabilize below 6% in 2023, but Freddie Mac forecasts rates to end at 6.2%.

With the fight over raising the debt ceiling likely to drag into the summer, borrowers should expect rate volatility. Prospective homebuyers should remain vigilant for any favorable changes in the rates but shouldn’t wait for rates to decrease further, as they may start increasing again soon.

References:

• https://www.hsh.com/2month4cast.html
• https://www.noradarealestate.com/blog/mortgage-interest-rates-forecast/
• https://www.noradarealestate.com/blog/mortgage-rate-predictions-next-week/
• https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/
• https://themortgagereports.com/32667/mortgage-rates-forecast-fha-va-usda-conventional