Another big drop in mortgage rates just happened – will they keep falling?

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Mortgage rates continue to decline the housing market is gearing up for the spring home buying seasonextending a recent streak of lower rates that many experts expect to continue for the rest of the year.

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The average 30-year fixed rate mortgage was 6.28% in the week ending April 6, 2023, according to Freddie Mac. That was down from 6.32% the previous week and below the four-week average of 6.41%. Current rates are still well up from a year ago, when they hovered just below 5%, but have fallen sharply since peaking at 7.08% in 2022.

The rate on a 15-year fixed-rate mortgage rose slightly from the previous week to 5.64%, just below the four-week average of 5.7% and well below the peak on 52 weeks of 6.38%.

Buyers facing challenges

Freddie Mac noted that homebuyers still face a number of challenges, including limited inventory, especially for first-time buyers. But buyers can take comfort in the fact that mortgage rates may have already peaked.

Much hinges on the Federal Reserve’s willingness to continue fighting inflation through interest rate hikes. The headline inflation rate has downward trend in recent monthsalthough the most recent rate of 6% is still well above the Fed’s target rate of 2%.

Following its March meeting, the Fed said “further policy tightening may be appropriate” to bring inflation down to 2%, Forbes Advisor reported. It was during this meeting that the central bank raised its federal funds rate by a quarter point to a new range of 4.75% to 5%. There is a chance that the Fed will slow its rate of increases, or suspend them altogether.

Many housing experts expect the Fed to put the brakes on, which could lead to much lower mortgage rates by the end of the year.

“Long-term rates have already peaked. We expect 30-year mortgage rates to end in 2023 at 5.2%,” the Mortgage Bankers Association said in a statement earlier this year.

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A similar assessment was provided by Neda Navab, president of the US region of real estate brokerage Compass Inc.

“There have been signals that mortgage interest rates may be at or near their peak, given recent encouraging news about inflation and a corresponding drop in US Treasury yields that help set mortgage rates. “, Navab told Forbes. “A sustained decline could push mortgage rates into the 5% range late in the second quarter or into the second half of 2023, but that’s certainly not guaranteed.”

Others take a wait-and-see approach to find out how certain events unfold, including the banking crisis and the debt ceiling debate.

Meanwhile, potential homebuyers will keep an eye not only on mortgage rates, but also on home inventory, which remains low. In an April 9 blog for HousingWire, housing data analyst Logan Mohtashami said he hoped “April is the month we see the seasonal rise in inventory.”

“Mortgage rates during the previous economic expansion ranged between 3.25% and 5%, and stocks slowly fell further and further,” Mohtashami wrote. “Last year we had the biggest mortgage rate hike in history, and that created more inventory for us, but it couldn’t get us back to 2019 levels.”

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