We use cookies to enhance your browsing experience and deliver our services. By continuing to visit this site, you agree to our use of cookies.More info
The Cassity Team | REALThe Cassity Team | REAL
Call Us:

619-800-6178

  • Join Our Team
Ask Us Anything
Follow us
The Team

About Us

  • Meet the Team
  • See Our Results
  • See How We Can Help
  • Read Our Blog
  • Join Our Team
  • 🏡 Deal Of The Week

Our Services

  • Search for Homes
  • Sell With Us
  • Buy With Us
  • Calculate Your Mortgage
The Cassity Team | REAL

1420 Kettner Blvd, San Diego, CA 92101

  • 619-800-6178
  • [email protected]

Will Mortgage Rates Go Down in 2023?

Mortgage rates fell to an all-time low of 2.65% in 2021. Now they’re more than double that, and everyone is asking the same...

  • Jason Cassity
  • April 5th, 2023
  • 5 min read
Featured Image

Mortgage rates fell to an all-time low of 2.65% in 2021. Now they’re more than double that, and everyone is asking the same question.

Will mortgage rates drop in 2023?

Let’s break it down.

Why are mortgage rates so high?

Mortgage rates are influenced by several factors, the foundation of which is the overall state of the economy. When the economy is doing well and moving fast, rates are typically higher. When the economy is sluggish, rates are usually lower. Seem backward? Here’s why it works that way:

The Fed

Many people think that the Federal Reserve (also known as “the Fed”) sets mortgage rates, but that’s not quite true. The Fed sets the federal funds target rate, which guides the amount that banks charge each other to borrow money and impacts the rates they charge consumers, too. That’s because it changes the amount banks must charge to cover their own costs.

Why does the Fed ever raise rates? Everyone likes a lower interest rate—right? The Federal Reserve has two jobs, called its “dual mandate,” as assigned by Congress. It must act to keep prices stable in the economy and to support maximum employment. One of the ways it does this is by moderating interest rates to support a stable financial system (O’Connell, 2023). 

For example…

When the economy is slow—like it was during the initial COVID-19 crisis—the Fed lowers its rates to increase cash flow and encourage consumer spending. But when the economy is doing well and moving fast, borrowing, consumer spending, and demand are all elevated—which can cause inflation. A major problem with inflation is when prices rise at a rate with which salaries don’t keep pace, people suddenly can’t afford to buy things, and the economy grinds to a halt. For that reason, when the economy is moving too quickly and inflation is growing unsustainably, the Fed increases the federal funds rate to constrict cash flow.

The idea is that higher rates—while uncomfortable—will slow spending to a sustainable pace while preventing an economic crash down the road. Since the housing market, consumer spending, and inflation all hit peaks in late 2022, the Fed pumped the brakes with interest rate hikes in an effort to divert a full-blown recession.

Will mortgage rates drop in 2023?

Now that we know why rates are so high, we can make an educated guess about their future. Many experts suggest that 2023 will see a slowdown in the U.S. economy, and if that’s true, mortgage rates will drop as well.

Will mortgage rates go down in 2023? Here are the detailed answers from top industry experts:

Mortgage Bankers Association

The Mortgage Bankers Association has stated that “long-term rates have already peaked. We expect that 30-year mortgage rates will end 2023 at 5.20%.” As of this writing, the average APR for the benchmark 30-year fixed-rate mortgage is over 7%, so that prediction represents a significant drop by 2023’s end.

National Association of Realtors

The NAR Director of Forecasting, Nadia Evangelou, predicts that “mortgage rates likely will settle below 6% and experience less volatility this year.” She continued by saying that “Although rates remain more than double a year ago, they will likely stabilize as inflation will continue to slow down in the coming months.”

Goldman Sachs

Analysts at Goldman Sachs are less optimistic, predicting that mortgage rates will average 6.5% in 2023. Why this rate? The investment bank expects a “significant decline in U.S. inflation,” but also notes “that the rapid decline in mortgage origination, especially refinances, has caused some lenders to exit or scale back lending. This has the potential to allow the remaining lenders to expand their margins by pushing mortgage rates higher” (Lambert, 2023).

 

Freddie Mac

In its most recent forecast, Freddie Mac predicted that the 30-year fixed-rate mortgage will average 6.4% in 2023, with a lower average of 6.2% in the fourth quarter. The financial company cited the job market, moves from the Fed, and the decelerating housing market.

 

Morgan Stanley

In its U.S. housing market outlook forecast, Morgan Stanley predicts that 30-year fixed mortgage rates will average 6.2% in 2023. In a best-case scenario, the investment bank writes that mortgage rates could fall below 6%, but that would require the Fed to successfully tame inflation sooner than expected (Lambert, 2022).

 

Bankrate

Bankrate’s chief financial analyst, Greg McBride, CFA, forecasts mortgage rates to fall to 5.25% by the end of 2023. He explained that “we should see a notable pullback in mortgage rates as inflation pressures ease and as the economy slows” (Ostroski, 2023).

 

Final thoughts

Financial and real estate industry experts agree that mortgage rates will fall in 2023. By how much? That’s still up for debate, with some experts forecasting a nearly 2% drop and others one of less than 1%.

No matter the number, lower mortgage rates represent relief for buyers struggling with affordability. If you’ve been waiting to buy due to high home prices and high mortgage rates, 2023 is shaping up to be a good year for you.

But even as rates come down, they’re not likely to hit 2021 levels—so you’ll want to do everything you can to reduce your rate on your own. That means working on your credit score, looking into a rate buydown, and shopping around to find the lender with the best terms for you. 

 

Let’s buy your dream home in 2023

If falling mortgage rates are music to your ears and you’re ready to buy in 2023, get in touch. Not quite sure about the next steps? Our expert team can help. Click the button below so we can help you make your homeownership goals a reality.

Let's go

Author Photo
About the author

Jason Cassity

610-800-6178
  • facebook
  • X
  • instagram
  • linkedin
  • youtube
I started in this business as an intern, helping a successful broker write SEO rich blogs about San Diego. When I think back on that time, I think “how serendipitous is it that I found him, versus the tens of thousands of other agents who would’ve just had me call FSBOs, hold open houses, or do floor time. I reflect on how important your environment is to your growth and success. Because I liked blogging, website building, marketing/SEO… that first indie brokerage was the PERFECT place for me to begin my career.

Similar posts like this

Home Improvement

The Fixer-Upper: Dream Project or Money Pit?

For many homeowners and real estate enthusiasts, the idea of purchasing a fixer-upper property holds an undeniable allur...
Read more
Homeowner Tips

First Time Home Seller? Avoid These Mistakes

Read more
House Hunting

Vacation Home Investments: Is Summer the Right Time to Buy?

Summer is often considered the peak season for vacation home sales, with many buyers eager to secure their dream getaway...
Read more
The Cassity Team | REAL

“Who You Work With Matters!"

The Cassity Team | REAL Broker, LLC | CA DRE 01928236

1081 Camino Del Rio S, San Diego CA 92108

The Cassity Team | REAL Broker, LLC | CA DRE 01928236

1081 Camino Del Rio S, San Diego CA 92108

619-800-6178
[email protected]

Footer Links

  • Meet the Team
  • Search for Homes
  • See How We Can Help
  • Contact Us
  • Sell With Us
  • Read Our Blog
  • See Our Results
  • Mortgage Calculator
  • Buy With Us
Join Our Email List:

*We respect your inbox. We only send interesting and relevant emails.

The Cassity Team | REAL Broker, LLC | CA DRE 01928236 © 2025

Privacy Policy
Powered by