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The Home Front
The rocky 2022 mortgage market roller coaster continues its wild ride as prospective home buyers hang on for dear life and worry about the Grinch stealing their holiday cheer.

27-Nov-22 – Freddie Mac’s Primary Mortgage Market Survey reported on November 17 that benchmark 30-year fixed-rate home loans fell to a nationwide average of 6.61 percent, down from the year’s high of 7.08 percent a week earlier. A year ago, 30-year fixed mortgages averaged a bargain-rate 3.1 percent.

Freddie Mac

“Mortgage rates tumbled due to incoming data that suggests inflation may have peaked,” said Sam Khater, Freddie Mac’s chief economist. “While the decline in mortgage rates is welcome news, there is still a long road ahead for the housing market.”

Inflation remains elevated, but Khater predicted that “the Federal Reserve is likely to keep interest rates high, and consumers will continue to feel the impact.”

Fifteen-year-fixed rate mortgages averaged 5.98 percent on November 17, down from 6.38 percent a week earlier. A year ago, 15-year fixed loans averaged 2.39 percent.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit.

Over the past 50 years, Freddie Mac has closely reported the movement of home loan interest rates. However, in 2022 the mortgage market has been so wild and volatile, that Khater said going forward, new and more detailed information is needed to monitor real-time interest rates more closely to improve the collection, quality, and diversity of data used.

“Instead of just surveying lenders, our weekly survey results are now based on thousands of loan applications from across the country that are submitted to Freddie Mac when a borrower applies for a mortgage,” Khater (right) explained.

Sam Khater

Dim light at the end of the mortgage rate tunnel

With interest rates roughly doubling from their lows in early 2022, experts say it’s a fair assumption that the cost of financing a home won’t be coming down this year.

But what is the long-range outlook for mortgage rates in 2023? Is there any light at the end of this dark tunnel? At least one forecaster says no.

Dennis Shirshikov

“Continued inflation, overall higher interest rates, a potential recession, and geopolitical tensions will force 30-year and 15-year mortgage rates up throughout 2023 and will bring the two rates closer together as short-term risks rise,” cautions Dennis Shirshikov (left), a strategist at Awning.com and a professor of economics and finance at City University of New York.

In 2023, the gloomy analyst foresees the 30-year and 15-year mortgage rates averaging 8.75 percent and 8.25 percent, respectively.

However, Rick Sharga, Executive Vice President of Market Intelligence for ATTOM Data Solutions, which analyzes real estate and property data, is more hopeful. He forecasts 30-year rates peaking at about 8 percent, while 15-year rates rise to 7.25 percent in early 2023. Then, he sees rates gradually coming down over the course of the year to a range of 6 percent and 5.25 percent, respectively.

“This is entirely dependent on the Federal Reserve’s ability to get inflation under control and ease up on its aggressive rate increases,” said Sharga (right).

Rick Sharga

Meanwhile, Nadia Evangelou, Senior Economist & Director of Forecasting for the National Association of REALTORS, envisions three different rate scenarios possibly occurring next year:

1 If inflation continues to remain high, the Fed will be forced to raise interest rates repeatedly. That means 30-year mortgage rates will keep climbing, possibly near 8.5 percent.

2 If the consumer price index responds more to the Fed’s rate hikes, and there is a gradual deceleration of inflation, 30-year home-loan rates could stabilize in the 7 to 7.5 percent range for 2023.

3 If the Fed raises rates repeatedly to curb inflation and the economy falls into a recession, 30-year mortgage rates likely could plummet to 5 percent.

Bargain-hunter specials

As of November 17, Chicago-area borrowers who move quickly still have a faint chance to lock in the following below-market rates, reports RateSeeker.com.

• First Savings Bank of Hegewisch was quoting 6.217 percent on 30-year conventional loans and 5.550 percent on 15-year mortgages with a 20 percent down payment and a $615 loan fee.

• Mutual of Omaha was quoting 6.699 percent on 30-year conventional loans with a 20 percent down payment and 6.125 percent on 15-year mortgages with a 20 percent down payment. Borrowers also must pay a $850 loan fee. The lender also is offering 30-year Federal Housing Administration-insured mortgages at 5.875 percent with a low 3.5 percent down payment, and Veterans Administration-guaranteed loans at 5.875 percent with no down payment.