Interest rates 2023 – what the lenders say
As I continue to do more reading and analyzing of mortgage rates for next year, I’ve come across some articles with relevant information that homebuyers and homeowners may want to consider. There are also some good links to podcasts here, too.
Much lower interest rates by March. Why and what it means
by Jay Voorees, JVM Lending
On Thursday, CPI (inflation data) came in lower than expected – and we saw one of the largest one-day rate drops ever. I, of course, blogged about it here: THIS IS HUGE! Inflation & Rates PLUMMET.
My biggest takeaway, though, wasn’t just that inflation and rates dropped; it was to point out how correct the likes of some of the macro-observers I follow were with their predictions. In light of their accuracy, I want to again point out what they are predicting for EARLY NEXT YEAR – and it is why I am so convinced we will see much lower rates by March!
I am bringing this up again because I spoke on a panel in front of a large group of agents a few weeks ago, and one of the other panelists insisted that we would see rates in the 8.5% range by early next year – with little evidence to back up his prediction. What alarmed me more, however, was the surprisingly large number of people in the audience who heartily agreed with him.
Hence, I decided then and there to blog about this again (despite hitting it a few times already) because a large potential rate drop is so important when it comes to the real estate market.
If rates are going to drop significantly:
1. Buyers will be able to refinance into a much lower rate.
2. Buyers should not pay points to “permanently” buy down their rates because those points will be wasted if they refinance soon.
3. Buyers concerned about high rates and payments now should take comfort in the likelihood of refinancing into a lower rate and payment.
4. Buyers who are convinced interest rates impact home values should expect values to increase when rates drop.
The reason I am so convinced rates will plummet early next year is because the macro guys who were so correct last week are predicting a major recession, a fall-off in demand, and even deflation by Q2 of next year – and all of that translates into much lower rates.
Will rates stay low?
No, I don’t think so, as I think we will see inflation rear its head again for a variety of reasons – and that will push rates up again (which is why I still LOVE real estate as an inflation hedge). As for timing though, I have no clue.
For the remainder of this article and associated links, click here.
Jay Voorhees, Founder, JVM Lending
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My favorite lender, Greg Lartilleux, read this article and agrees that rates should come down next year, but he stated that it may not happen by March, so be cautious with expectations. “Yes,” Greg says, “I absolutely agree that rates will come down next year … not sure about ‘promising’ that they will do ‘by March’ though … but I do like the 4 points he makes.”
We do, however, have to be cautious to not promise to buyers that their payment will be lower in the future (“Don’t worry about it, just sign the dotted line with this high payment you can’t afford, you’ll just refi next year, I promise”) … because if values go down buyers might not have enough equity to refi.
I'm always cautious. I say it's “likely” that they will be able to refinance but they should not be banking on it 100%.