Today’s mortgage and refinance rates: November 7, 2022 | High rates for decades have changed the housing market

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According to Freddie Mac, average 30-year fixed mortgage rates are currently the highest in 20 years. Since January, rates have risen more than three percentage points, adding hundreds of dollars to the average monthly mortgage payment and pushing many newbie and low-income borrowers out of the market.

Last week, the National Association of Realtors released its annual profile of home buyers and sellers, which found that high rates combined with persistently high home prices have reshaped the appearance of the typical home buyer.

The share of first-time homebuyers has fallen to an all-time low of just 26%, according to the report. A year ago, first-time buyers made up 34% of all homebuyers. First-time home buyers are also older today than they have ever been, at a typical age of 36, up from 33 last year.

“It’s no surprise that the share of first-time buyers has fallen to an all-time low given the housing market’s combination of historically low inventory, persistently high house prices and interest rates. rapidly increasing,” Jessica Lautz, vice president of demographics and behavior at NAR Insights, said in a press release.

First-time home buyers currently struggling with affordability may find some relief in 2023, as many experts expect rates to start falling as inflation cools.

Today’s Mortgage Rates

Today’s Refinance Rates

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Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments:

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Are HELOCs a good idea right now?

Many homeowners have gained great net worth over the past couple of years as home prices have risen at an unprecedented rate. But since rates are so high today, tapping into that equity can be costly.

For homeowners looking to leverage the value of their home to cover a big purchase, like a home improvement, a home equity line of credit (HELOC) can still be a good option.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similar to a credit card in that you borrow what you need rather than getting the full amount you borrow in one 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 with a home equity loan or cash refinance. Just keep in mind that HELOC rates are variable, so if rates start to increase further, yours will likely increase as well.

Projection of mortgage rates for 2023

Mortgage rates started to recover from historic lows in the second half of 2021 and have risen more than three percentage points so far in 2022. They will likely remain near current levels for the remainder of 2022.

But many forecasts predict that rates will start falling next year. In their latest forecast, Fannie Mae researchers predicted that rates are currently peaking and that 30-year fixed rates will drop to 6.2% by the end of 2023.

The Mortgage Bankers Association also noted that a recession in the first half of 2023 could cause rates to drop even faster. He currently estimates that there is a 50% chance that a mild recession will materialize next year.

The decline in mortgage rates in 2023 depends on the Federal Reserve’s ability to control inflation.

Over the past 12 months, the consumer price index has increased by 8.2%. This is only a slight slowdown from the previous month’s numbers, meaning the Fed will likely need to continue to aggressively raise fed funds rates to bring prices down significantly.

As inflation slows, mortgage rates will likely start to come down as well. If the Fed acts too aggressively and engineer a recession, mortgage rates could fall further than currently forecast. But rates are unlikely to fall to the historic lows that borrowers have enjoyed over the past two years.

When will real estate prices go down?

House prices are starting to drop, but we probably won’t see huge drops, even in a recession.

The S&P Case-Shiller Home Price Index shows that prices are still up year-over-year, although they fell on a monthly basis in July. Fannie Mae researchers expect prices to fall 1.5% in 2023, while the MBA expects prices to rise 2.8% in 2023 and 2.1% in 2024.

Skyrocketing mortgage rates have pushed many promising buyers out of the market, slowing demand for home purchases and putting downward pressure on home prices. But rates could start falling next year, taking some of that pressure off. The current supply of homes is also historically low, which will likely prevent prices from falling too far.

What happens to house prices in a recession?

House prices generally fall during a recession, but not always. When this happens, it’s usually because fewer people can afford to buy homes and weak 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 house prices and down payment amounts to see how much your monthly payment might be, and think about how that fits into your overall budget.

As a general rule, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means that your total monthly mortgage payment, including taxes and insurance, should not 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 pre-approved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than your budget can comfortably support.

Molly Grace

mortgage reporter