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Mortgage of the day, refinancing rate: January 6, 2023

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Mortgage rates are expected to start falling this year, but significant cuts may not occur until later in 2023 or even 2024 as the Federal Reserve has signaled that it is prepared to maintain tight fiscal policy until the inflation returns to its target annual rate of 2. %.

30-year yields have risen an average of six basis points this week, according to Freddie Mac, although they are slightly lower today than they were at the start of the week.

For homebuyers, finding the best mortgage rate from multiple lenders can make a big difference in the overall cost of the loan, especially in a high rate environment. Try to get pre-approved from at least two or three lenders to compare offers.

Today’s Mortgage Rates

Type of mortgage Average rate today
This information was provided by Zillow. See more mortgage rates on Zillow

Today’s Refinance Rates

Type of mortgage Average rate today
This information was provided by Zillow. See more mortgage rates on 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

  • pay one 25% a higher down payment would save you $8,916.08 on interest charges
  • Lower the interest rate by 1% would save you $51,562.03
  • Pay an extra fee $500 each month would reduce the term of the loan by 146 month

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.

Are HELOCs a good idea right now?

Many homeowners have acquired a lot of equity in recent years as home prices have risen at an unprecedented rate. But since rates are so high today, tapping into that equity can be costly.

For homeowners looking to leverage the value of their home to cover a big purchase, like a home improvement, a home equity line of credit (HELOC) can still be a good option.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similar to a credit card in that you borrow what you need rather than getting the full amount you borrow in one lump sum.

Depending on your finances and the type of HELOC you get, you may be able to get a better rate with a HELOC than with a home equity loan or cash refinance. Just keep in mind that HELOC rates are variable, so if rates start to increase further, yours will likely increase as well.

Projection of mortgage rates for 2023

Mortgage rates started to recover from historic lows in the second half of 2021 and increased by more than three percentage points in 2022.

But many forecasts predict that rates will start falling this year. In their latest forecast, Fannie Mae researchers predicted that 30-year fixed rates will trend lower throughout 2023 and 2024.

But whether mortgage rates will fall in 2023 depends on the Federal Reserve’s ability to control inflation.

Over the past 12 months, the consumer price index has increased by 7.1%. This is a significant slowdown from inflation at the start of the year, which is a sign that mortgage rates may also start to fall soon.

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 throughout 2020 and 2021.

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 and August. Fannie Mae researchers predict a 1.5% price decline in 2023, while the MBA predicts a 0.7% increase in 2023 and a 0.1% decline 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 soon start to fall, 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.

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