Mortgage Rate Predictions For 2023

Perhaps, the worst is over for mortgage rates—at least for the time being.

Rates for home loans seemed to be on a relentless climb in 2022, now sitting at double what they were a year ago. But a steady decline in rates the past two months have convinced more economists that rates could level off through early 2023, barring an economic downturn. 

The average 30-year, fixed-rate mortgage was 6.33% for the week ending January 12, down from 6.48% in the previous week, according to Freddie Mac. While mortgage rates climbed a bit at the end of December, rates are still lower than last year’s peak of 7.08% November 10 and October 27—the highest rate in more than 20 years.

Most housing experts say they’re hopeful that interest rates will level off in 2023 to around 5% to 6%, but others say the increases will likely continue into early 2023 until inflation is lower.

Mortgage Rate Forecast For January 2023

Rates for home loans are caught in a tug-of-war between high inflation and the Federal Reserve’s actions to restrain inflation, which indirectly pushed rates higher. 

The Federal Reserve hiked its benchmark interest rate seven times in 2022 by December. The latest Consumer Price Index (CPI) said inflation rose by 6.5% in December, down from a 7% increase the previous month.  Prior to this, the Fed signaled plans to continue raising the federal funds rate into 2023, though likely at smaller increases. 

Experts expect the Fed’s ongoing monetary policies to continue to put some upward pressure on mortgage rates in the coming months. Mortgage rates are directly impacted by the bond market, which reacts to the Fed’s actions. 

“We can expect financial market volatility to continue until investors have more clarity about the economy’s direction,” said George Ratiu, Realtor.com’s director of economic research, in an emailed statement. “With the Fed committed to monetary tightening until inflation is decidedly moving toward 2%, borrowing costs will remain elevated, keeping housing affordability at the top of the year’s list of challenges.”

While some housing experts say mortgage rates have likely reached their peak and expect rates to fall further before stabilizing, they remain cautious given the past year’s extreme fluctuations and economic uncertainty.

With “the Fed committed to keep increasing the funds rate over the next few months, the mortgage market is not out of the woods,” Ratiu said. “We may still see rates rebound back above 7% before the end of the year.”

Here’s how other experts predict market conditions will affect the 30-year, fixed-rate mortgage in the coming months:

• 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 Bankers Association (MBA):  “Long-term rates have already peaked. We expect that 30-year mortgage rates will end 2023 at 5.2%.”


• National Association of Realtors (NAR) senior economist and director of forecasting, Nadia Evangelou: “If inflation continues to slow down–and this is what we expect for 2023–mortgage rates may stabilize below 6% in 2023.” Many buyers want to believe that the 3% may come again, however, we don’t expect to see that.


• Freddie Mac: Forecasts the average 30-year mortgage rate to start at 6.6% in Q1 2023 and end up at 6.2% in Q4 2023.

Is There Still Time To Refinance?

Americans watch mortgage rates closely, and any time rates pull back even the slightest amount, more people apply for mortgages. With rates still substantially higher than a year ago, however, applications remain stuck near the lowest level in more than two decades, according to MBA data.

While refinancing options can lead to a lower monthly payment, not all of the options yield less interest over the life of the loan. For example, refinancing from a 5% mortgage with 26 years left on it to a 4% rate, but for 30 years, will cause you to pay more than $13,000 in additional interest.

Before you start shopping around for a lender, you can find out how much you could save by using a mortgage refinancing calculator.

You’ll also want to consider how long you plan on staying in your home as the closing costs can eat up your savings if you sell shortly after refinancing. The closing costs to refinance run between 2% to 5% of the loan amount, depending on the lender. So you should plan on keeping your home long enough to cover those costs and realize the savings from refinancing at a lower rate.

Keep in mind that the rate you qualify for also depends on other factors such as your credit score, debt-to-income (DTI) ratio, loan-to-value (LTV) ratio and proof of steady income.

Current Mortgage Rate Trends

The average mortgage rate for a 30-year fixed is 6.37%, more than double its 3.22% level at the start of 2022.

The average cost of a 15-year, fixed-rate mortgage has also surged to 5.66%, compared to 2.43% in early January 2022.

In the current environment, ARMs might be more affordable than those with fixed rates. The average 5/1 ARM is 5.47%.

Current Mortgage Rates for January 2023

Current Refinance Rates for January 2023

The current average rates for mortgage refinances are:

• 30-year fixed: 6.41%


• 15-year fixed: 5.79%


• 30-year jumbo: 6.39%


• 5/1 ARM: 5.41%

Mortgage Rate Predictions For The Next 5 Years

While predicting mortgage rates for the next five years is a tall order, especially considering the unprecedented fluctuations the past year, one main factor that experts say will impact rates in the long term is the low level of housing inventory.

“When rates come down, we’re going to be in store for another hot housing market where there are more buyers than sellers jacking up prices because we haven’t solved the problem of there not being enough homes,” says Daryl Fairweather, chief economist at Redfin. “It’s still that affordability problem. That’s going to stay with us.”

As far as which direction interest rates go in the years ahead, Fairweather expects declines. However, the timeline for this downward trend remains uncertain.

“In every scenario, rates are going to come back down,” says Fairweather. “It’s just a matter of when.”

What Affects Mortgage Rates?

There are a complex set of factors that impact mortgage interest rates, including broader economic conditions, the monetary actions of the Federal Reserve (to some extent) and inflation.

Had the Covid-19 pandemic not happened, which forced the Fed to take actions to help the economy, mortgage “rates would have likely remained in a more predictable range of 5% to 6%,” says Mike Opyd, a managing broker of RE/MAX Next in Chicago. “This is where I expect rates to correct themselves in 2023 and remain for the foreseeable future.”

Long-term mortgage rates are directly impacted by the bond market, which is influenced by the Fed’s decisions. The rate you’re offered on a mortgage will also depend on the lender you work with, its business costs and your financial profile.

Demand for mortgages can also affect rates, pushing it higher as available capital for lending tightens. Conversely, when there’s less borrower demand—as we’re seeing now due to average interest rates hovering in the high-6% range—lenders might consider offering more competitive rates or other incentives to attract borrowers.

How to Shop for the Best Mortgage Rate

Getting an optimal rate on a home loan can save you a significant amount of money over time. Here are some tips that can help you get the best rate possible for your situation:

• Keep your eye on rates. Mortgage rates are constantly changing. Keeping a close watch will make it easier to find and lock in a better rate.


• Check your credit. When you apply for a mortgage, the lender will review your credit to determine your creditworthiness as well as your interest rate. In general, the higher your credit score, the better your rate will be. To get an idea of where you stand, check your credit before you apply and dispute any errors with the appropriate credit bureau to potentially boost your score.


• Shop around and compare lenders. Consider options from as many mortgage lenders as possible to find the best deal for you. Prospective buyers have saved more than $1,500 over a loan’s term by getting two quotes from lenders, and saved roughly $3,000 when they sought five quotes, according to Freddie Mac.