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Mortgage Rates Forecast | Will Rates Go Down In January 2023?

Mortgage rate forecast for next week (Jan. 9-13)

After declining through the end of 2022, interest rates grew for the second week in a row.

The average 30-year fixed rate mortgage rose from 6.42% on Dec. 29 to 6.48% on Jan. 5, according to Freddie Mac.

“Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of millennial renters will provide support to the purchase market. Moreover, if rates continue to decline, borrowers who purchased in the last year will have opportunities to refinance into lower rates,” said Freddie Mac Chief Economist Sam Khater.

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Will mortgage rates go down in January?

Mortgage rates fluctuated greatly in 2022. The average 30-year fixed rate went as low as 3.22% on Jan. 6 and reached a high-water mark of 7.08% on Nov. 10, according to Freddie Mac.

The year’s big rate movements can be attributed largely to the Federal Reserve’s aggressive actions to help combat decades-high inflation. However, with inflation starting to cool, the Fed eased its foot off the gas in December and is expected to make smaller rate hikes in 2023.

With the economy likely heading into a recession, it’s possible we’ve already seen the peak of this rate cycle. Of course, interest rates are notoriously volatile and could tick back up on any given week.

Experts from Attom Data Solutions, First American, Zillow, and others weigh in on whether 30-year mortgage rates will climb, fall, or level off in January.

“As inflation continues to come down even more, that will help take some pressure off of mortgage rates.”

–Nicole Bachaud, senior economist at Zillow

Expert mortgage rate predictions for January

Nicole Bachaud, senior economist at Zillow

Prediction: Rates will moderate

“We’ve seen inflation numbers cooling off the past couple of months and mortgage rates responded by following that. As inflation continues to come down even more, that will help take some pressure off of mortgage rates. We’re not going to see as many rapid rate movements. We’ll likely see rates stabilizing and coast around the range they’re in now for the next couple of months.”

Nadia Evangelou, senior economist & director of forecasting at the National Association of Realtors

Prediction: Rates will drop

“Mortgage rates will likely start the year near 6.2%. Two of the main factors affecting today’s mortgage market have recently become more favorable. Inflation continues to ease while the Federal Reserve has switched to smaller interest rate hikes. 2022’s higher federal funds rates have started to tame inflation. Thus, mortgage rates will likely stabilize below 6% in 2023.

While that’s a lot more money buyers must pay out every month, interest rates between 3% and 6% are still lower than 8%, which is the historical average rate for a 30-year fixed mortgage.”

Selma Hepp, deputy chief economist at Corelogic

Prediction: Rates will drop

“I think mortgage rates could continue to fall, but remain above 6% in January, as inflation showed signs of pulling back and a few economic indicators point to some early signs of economic weakening. Mortgage rate spreads, while still elevated, have been shrinking. This is also driving the decline in rates. Investors may be anticipating the Fed pulling back monetary tightening sooner than the Fed is currently communicating. ”

Odeta Kushi, deputy chief economist at First American

Prediction: Rates will moderate

“Mortgage rates will continue to face upward pressure until inflation convincingly cools. The Federal Reserve has made it clear that its stance will remain hawkish until inflation begins to approach its desired target of 2%. However, recession fears and any new data that suggests inflation is cooling may put some downward pressure on mortgage rates. The result of these push-and-pull factors may be a moderation in mortgage rates.”

Rick Sharga, EVP of market intelligence at Attom Data Solutions

Prediction: Rates will moderate

“Mortgage rates will probably be more or less flat for most of January, moving up or down within a fairly tight band — perhaps between 6.25% and 6.50% for a 30-year fixed-rate loan. Actions and comments by the Federal Reserve have generally been the cause of more rapid spikes and declines in mortgage rates recently, and the Fed isn’t scheduled to meet again until January 31st.

There is a consumer price index (CPI) report scheduled for Jan. 12, and any surprises — to either the upside or downside — regarding inflation numbers could cause a bigger movement in mortgage rates as well.”

Mortgage interest rates forecast next 90 days

As inflation ran rampant in 2022, the Federal Reserve took action to bring it down and that led to big interest rate growth. The average 30-year fixed-rate mortgage more than doubled within the course of the year.

However, with inflation cooling, the Fed starting to slow its rate hikes, and the likelihood of a recession, many experts currently believe mortgage interest rates will descend or move within a tighter range compared to the spikes we saw earlier in 2022.

Of course, rates could rise on any given week or if another global event causes widespread uncertainty in the economy.

Mortgage rate predictions for early 2023

The 30-year fixed-rate mortgage was averaging 6.42% as of Dec. 29, according to Freddie Mac. Only two of the six major housing authorities we looked at project 2023’s first quarter average to finish below that.

The National Association of Realtors and the Mortgage Bankers Association sit at the low end of the group, estimating the average 30-year fixed interest rate will settle at 6.1%-6.2% for Q1. Meanwhile, the National Association of Home Builders and Wells Fargo had the highest predictions, with forecasts of 6.74% and 6.75%, respectively, by the end of March 2023.

Housing Authority 30-Year Mortgage Rate Forecast (Q4 2022)
National Association of Realtors 6.10%
Mortgage Bankers Association 6.20%
Fannie Mae 6.50%
Freddie Mac 6.60%
National Association of Home Builders 6.74%
Wells Fargo 6.75%
Average Prediction 6.48%

Mortgage rates increased for the second straight week after falling in each of the six weeks prior.

The 30-year fixed rate rose from 6.42% on Dec. 29 to 6.48% on Jan. 5. The average 15-year fixed mortgage rate also increased from 5.68% to 5.73%.

Month Average 30-Year Fixed Rate
January 2022 3.45%
February 2022 3.76%
March 2022 4.17%
April 2022 4.98%
May 2022 5.23%
June 2022 5.52%
July 2022 5.41%
August 2022 5.22%
September 2022 6.11%
October 2022 6.90%
November 2022 6.81%

Source: Freddie Mac

Mortgage rates moved on from the record-low territory seen in 2020 and 2021 and hit a 14-year high in 2022. However, they followed a downward trajectory in December and are still below average from a historical perspective.

Dating back to April 1971, the fixed 30-year interest rate averaged around 7.8%, according to Freddie Mac. So if you haven’t locked a rate yet, don’t lose too much sleep over it. You can still get a good deal, historically speaking — especially if you’re a borrower with strong credit.

Just make sure you shop around to find the best lender and lowest rate for your unique situation.

Many mortgage shoppers don’t realize there are different types of rates in today’s mortgage market. But this knowledge can help home buyers and refinancing households find the best value for their situation.

Following are 3-month mortgage rate trends for the most popular types of home loans: conventional, FHA, VA, and jumbo.

November 2022 October 2022 September 2022
Conforming Loan Rates 6.58% 7.06% 6.72%
FHA Loan Rates 6.51% 6.85% 6.52%
VA Loan Rates 6.35% 6.74% 6.36%
Jumbo Loan Rates 6.50% 6.78% 6.49%

Source: Black Knight Originations Market Monitor Report

Which mortgage loan is best?

The best mortgage for you depends on your financial situation and your goals.

For instance, if you want to buy a high-priced home and you have great credit, a jumbo loan is your best bet. Jumbo mortgages allow loan amounts above conforming loan limits, which max out at $ in most parts of the U.S.

On the other hand, if you’re a veteran or service member, a VA loan is almost always the right choice. VA loans are backed by the U.S. Department of Veterans Affairs. They provide ultra-low rates and never charge private mortgage insurance (PMI). But you need an eligible service history to qualify.

Conforming loans and FHA loans (those backed by the Federal Housing Administration) are great low-down-payment options.

Conforming loans allow as little as 3% down with FICO scores starting at 620. FHA loans are even more lenient about credit; home buyers can often qualify with a score of 580 or higher, and a less-than-perfect credit history might not disqualify you.

Finally, consider a USDA loan if you want to buy or refinance real estate in a rural area. USDA loans have below-market rates — similar to VA — and reduced mortgage insurance costs. The catch? You need to live in a ‘rural’ area and have moderate or low income to be USDA-eligible.

Mortgage rate strategies for January 2023

Mortgage rates shot up rapidly to open 2022, driven by inflation and Fed hikes. The growth slowed as inflation declined and rates came down as the year ended.

At its December meeting, the central bank said it anticipated smaller hikes for 2023, and most housing authorities project mortgage rates to fall below their recent highs. This should add up to better opportunities for home shoppers and refinancers.

Here are just a few strategies to keep in mind if you’re mortgage shopping in the coming months.

Wield your negotiating power

After historic gains, home prices started coming down during the back end of 2022 and some industry experts believe they’ll keep falling.

It’s especially good timing for borrowers because winter typically provides better home-buying conditions.

“In today’s market, buyers are at an advantageous position because they have negotiating power, which is something they did not have at all during the pandemic,” said Nicole Bachaud.

With buyer demand in a lull and lower competition, home listings are sitting for sale longer. January opens up a great opportunity for borrowers to leverage their position in a cooling marketplace.

Shopping isn’t just for the holidays

Since interest rates can vary drastically from day to day and from lender to lender, failing to shop around likely leads to money lost.

Lenders charge different rates for different levels of credit scores. And while there are ways to negotiate a lower mortgage rate, the easiest is to get multiple quotes from multiple lenders and leverage them against each other.

“For potential home buyers, it’s important to get quotes from multiple lenders for a mortgage, as rates can vary dramatically, especially during such a volatile period,” said Odeta Kushi.

As the mortgage market slows due to lessened demand, lenders will be more eager for business. While missing out on the rock-bottom rates of 2020 and 2021 may sting, there’s always a way to use the market to your advantage.

How to shop for interest rates

Rate shopping doesn’t just mean looking at the lowest rates advertised online because those aren’t available to everyone. Typically, those are offered to borrowers with great credit who can put a down payment of 20% or more.

The rate lenders actually offer depends on:

  • Your credit score and credit history
  • Your personal finances
  • Your down payment (if buying a home)
  • Your home equity (if refinancing)
  • Your loan-to-value ratio (LTV)
  • Your debt-to-income ratio (DTI)

To figure out what rate a lender can offer you based on those factors, you have to fill out a loan application. Lenders will check your credit and verify your income and debts, then give you a ‘real’ rate quote based on your financial situation.

You should get three to five of these quotes at a minimum, then compare them to find the best offer. Look for the lowest rate, but also pay attention to your annual percentage rate (APR), estimated closing costs, and ‘discount points’ — extra fees charged upfront to lower your rate.

This might sound like a lot of work. But you can shop for mortgage rates in under a day if you put your mind to it. And shaving just a few basis points off your rate can save you thousands.

Mortgage interest rate FAQ

What are current mortgage rates?

Current mortgage rates are averaging 6.48% for a 30-year fixed-rate loan and 5.73% for a 15-year fixed-rate loan, according to Freddie Mac’s latest weekly rate survey. Your individual rate could be higher or lower than the average depending on your credit score, down payment, and the lender you choose to work with, among other factors.

Will mortgage rates go down next week?

Mortgage rates could decrease next week (Jan. 9-13, 2022) if the mortgage market takes a cautious approach to a possible recession. However, rates could rise if lenders account for the Federal Reserve continuing to take aggressive measures to counteract inflation or if a global event brings economic uncertainty.

Will mortgage interest rates go down in 2023?

If the historically high inflation of 2022 continues to dissipate and the economy falls into a recession, it’s likely mortgage rates will decrease in 2023. Although, it’s important to remember that interest rates are notoriously volatile and are driven by many factors, so they can rise during any given week.

Will mortgage interest rates go up in 2023?

Mortgage rates may continue to rise in 2023. High inflation, a strong housing market, and policy changes by the Federal Reserve have all pushed rates higher in 2022. However, if the U.S. does indeed enter a recession, mortgage rates could come down.

What is the lowest mortgage rate right now? 

Freddie Mac is now citing average 30-year rates in the 6 percent range. If you can find a rate in the 4s or 5s, you’re in a very good position. Remember that rates vary a lot by borrower. Those with perfect credit and large down payments may get below-average interest rates, while poor-credit borrowers and those with non-QM loans could see much higher rates. You’ll need to get pre-approved for a mortgage to know your exact rate.

Will there be a housing crash? 

For the most part, industry experts do not expect the housing market to crash in 2023. Yes, home prices are over-inflated. But many of the risk factors that led to the 2008 crash are not present in today’s market. Low inventory and massive buyer demand should keep the market propped up next year. Plus, mortgage lending practices are much safer than they used to be. That means there’s not a subprime mortgage crisis waiting in the wings.

What is the lowest mortgage rate ever?

At the time of this writing, the lowest 30-year mortgage rate ever was 2.65%. That’s according to Freddie Mac’s Primary Mortgage Market Survey, the most widely used benchmark for current mortgage interest rates.

Should I lock my rate now or wait?

Locking your rate is a personal decision. You should do what’s right for your situation rather than trying to time the market. If you’re buying a home, the right time to lock a rate is after you’ve secured a purchase agreement and shopped for your best mortgage deal. If you’re refinancing, you should make sure you compare offers from at least three to five lenders before locking a rate. That said, rates are rising. So the sooner you can lock in today’s market, the better.

Is now a good time to refinance? 

That depends on your situation. It’s a good time to refinance if your current mortgage rate is above market rates and you could lower your monthly mortgage payment. It might also be good to refinance if you can switch from an adjustable-rate mortgage to a low fixed-rate mortgage; refinance to get rid of FHA mortgage insurance; or switch to a short-term 10- or 15-year mortgage to pay off your loan early.

Is it worth refinancing for 1 percent? 

It’s often worth refinancing for 1 percentage point, as this can yield significant savings on your mortgage payments and total interest payments. Just make sure your refinance savings justify your closing costs. You can use a mortgage calculator or speak with a loan officer to crunch the numbers.

How do I shop for mortgage rates? 

Start by choosing a list of three to five mortgage lenders that you’re interested in. Look for lenders with low advertised rates, great customer service scores, and recommendations from friends, family, or a real estate agent. Then get pre-approved by those lenders to see what rates and fees they can offer you. Compare your offers (Loan Estimates) to find the best overall deal for the loan type you want.

What are today’s mortgage rates?

Mortgage rates are rising, but borrowers can almost always find a better deal by shopping around. Connect with a mortgage lender to find out exactly what rate you qualify for.

1Today’s mortgage rates are based on a daily survey of select lending partners of The Mortgage Reports. Interest rates shown here assume a credit score of 740. See our full loan assumptions here.

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