Today's mortgage and refinance rates: January 6, 2023
Mortgage rates are slightly lower today than they were at the beginning of the week. We may start to see more substantial rate drops later this year.
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Mortgage rates are expected to start trending down this year, but significant drops may not come until later in 2023 or even 2024, as the Federal Reserve has signaled it's prepared to continue keeping financial policy tight until inflation comes down to its target annual rate of 2%.The 30-year rates increased an average of six basis points this week, according to Freddie Mac, though they're slightly lower today than they were at the beginning of the week.For homebuyers, shopping around with multiple lenders for the best mortgage rate can make a big difference in the overall cost of the loan, particularly in a high-rate environment. Aim to get preapproved with at least two or three lenders to compare offers.Today's mortgage rates Mortgage type Average rate today This information has been provided by Zillow. See more mortgage rates on Zillow Today's refinance rates Mortgage type Average rate today This information has been provided by Zillow.
See more mortgage rates on Zillow Mortgage calculatorUse our free mortgage calculator to see how today's interest rates will affect your monthly payments: By clicking on "More details," you'll also see how much you'll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.Are HELOCs a good idea right now?Many homeowners gained a lot of equity over the past few years as home prices increased at an unprecedented rate. But because rates are so high now, tapping into that equity can be expensive. For homeowners looking to leverage their home's value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may still be a good option. A HELOC is a line of credit that lets you borrow against the equity in your home.
It works similarly to a credit card in that you borrow what you need rather than getting the full amount you're borrowing in a 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 you would with a home equity loan or a cash-out refinance. Just keep in mind that HELOC rates are variable, so if rates start to trend up further, yours will likely increase, as well.Mortgage rate projection for 2023Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022.But many forecasts expect rates to begin to fall this year. In their latest forecast, Fannie Mae researchers predicted that 30-year fixed rates will trend down throughout 2023 and 2024.But whether mortgage rates will drop in 2023 hinges on if the Federal Reserve can get inflation under control.In the last 12 months, the Consumer Price Index rose by 7.1%.
This is a significant slowdown compared to where inflation was earlier this year, which is a sign that mortgage rates may start coming down soon as well.If the Fed acts too aggressively and engineers a recession, mortgage rates could fall further than what current forecasts expect. But rates probably won't drop to the historic lows borrowers enjoyed throughout 2020 and 2021.When will house prices come down?Home prices are starting to decline, but we likely won't see huge drops, even if there's a recession.The S&P Case-Shiller Home Price Index shows that prices are still up year-over-year, though they fell on a monthly basis in July and August. Fannie Mae researchers expect prices to decline 1.5% in 2023, while the MBA expects a 0.7% increase in 2023 and a 0.1% decrease in 2024.Sky high mortgage rates have pushed many hopeful buyers out of the market, slowing homebuying demand and putting downward pressure on home prices.
But rates may start to drop soon, which would remove some of that pressure. The current supply of homes is also historically low, which will likely keep prices from dropping too far.What happens to house prices in a recession?House prices usually drop during a recession, but not always. When it does happen, it's generally because fewer people can afford to purchase homes, and the low 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 home prices and down payment amounts to see how much your monthly payment could be, and think about how that fits in with your overall budget.Typically, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means your entire monthly mortgage payment, including taxes and insurance, shouldn't 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 preapproved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than what your budget can comfortably handle.