Mortgage rates are expected to fall in 2023 after more than doubling this year, according to the Mortgage Bankers Association’s latest forecast.
The MBA economist also said he expects the US to enter a recession in the first half of next year.
said Mike Fratantoni, chief economist and senior vice president of research and industrial technology. “The sharp rise in interest rates this year is a result of the Federal Reserve’s efforts to curb inflation and will lead to a sharp slowdown in the economy, similar to the current recession in the housing market.”
But the result for homebuyers is that mortgage rates are expected to fall next year, Fratantoni said. The MBA forecasts mortgage rates of around 5.4% by the end of 2023. Average interest rate for a 30-year fixed-rate mortgage Currently 6.94%according to Freddie Mac.
Fratantoni warned that mortgage rates will continue to face significant volatility. Moon The Federal Reserve is expected to continue raising interest rates this year.
Ultimately, the Fed’s continued efforts to contain inflation will slow homebuyers’ demand for mortgages in 2023, according to projections.
Mortgage originations are expected to fall from $2.26 trillion in 2022 to $2.05 trillion in 2023, according to MBA. Mortgage purchases next year he is projected to fall by 3% and refinancing volumes to fall by 24%.
of Deceleration in housing activity Rising mortgage rates will slow the pace of house price gains, according to the MBA. The forecast predicts that home prices across the country will be roughly flat in 2023 and 2024.
“This will give household income the time it needs to catch up with rising property values,” said Joel Kang, MBA’s vice president and deputy chief economist. “But many local markets falling housing prices, even if the price index of the country has changed little. ”
Kang said first-time homebuyers will make up the majority of housing demand in the next few years. But as more homeowners remain unwilling to give up ultra-low-rate mortgages and stay where they are, it means fewer first homes are available. and low inventory of homes for sale, Slowdown in new construction activity That means housing supply is likely to continue to be constrained.
The MBA’s projections show that as unemployment rises during a recession, the currently low mortgage delinquency rate will also rise.
“National mortgage delinquency rates hit a record low in the second quarter of 2022, but increased unemployment and destruction from Hurricane Ian in Florida, South Carolina, and other neighboring states likely “It will increase,” said Marina Walsh, Vice Director of Industry Analysis.
She also said the mortgage industry will take a hit amid the slowdown.
“Origination volumes are declining, revenues are declining and costs continue to rise,” said Walsh. “Lenders are beginning to reduce their excess capacity by cutting headcount, exiting less profitable channels, and exiting the business entirely.”
The MBA estimates that employment in the mortgage industry should decline by 25% to 30% from peak to trough given the decline in output from record levels in 2020 and 2021.