Mortgage rates inch higher to kick off 2023: Freddie Mac

Mortgage rates increased again last week, but with inflationary pressure easing, the 2023 housing market could be gearing up to see an uptick in activity, according to Freddie Mac.

The average rate for a 30-year fixed-rate mortgage rose to 6.48% for the week ending Jan. 5, according to Freddie Mac's Primary Mortgage Market Survey. This was an increase from the previous week when it averaged 6.42% and significantly higher than last year when it was 3.22%.

The average rate for a 15-year mortgage was 5.73% last week, up from 5.68% the week before and up from 2.43% last year.  

Higher mortgage rates continue to test homebuyer affordability, according to the Mortgage Bankers Association (MBA). However, with inflation softening and the Federal Reserve easing up on interest rate increases, mortgage rates are likely to drop in 2023, according to Freddie Mac Chief Economist Sam Khater. 

"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," Khater said in a statement. "Moreover, if rates continue to decline, borrowers who purchased in the last year will have opportunities to refinance into lower rates."

If you are interested in taking advantage of lower mortgage rates, you could consider refinancing your loan to lower your monthly payment. You can visit Credible to find your personalized interest rate without affecting your credit score.

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Mortgage applications dip to the lowest level since 1996

Mortgage application activity dipped 13.2% on a seasonally adjusted basis from two weeks earlier, to the lowest level since 1996, according to the Mortgage Bankers Association's (MBA) weekly mortgage applications survey for the week ending Dec. 30, 2022. 

Refinance applications dropped 16.3% from two weeks ago and were 87% lower than a year ago.

"Even as home-price growth slows in many parts of the country, elevated mortgage rates continue to put a strain on affordability and are keeping prospective homebuyers out of the market," Joel Kan, MBA's vice president and deputy chief economist, said in a statement.

A combination of lower mortgage rates and rising housing supply should help buoy the number of households wanting to buy a home in 2023, the MBA said.

"Mortgage applications declined to close out 2022, continuing the trend seen for most of the past year," MBA President and CEO Bob Broeksmit said. "Although mortgage rates have increased slightly in recent weeks, MBA expects them to fall to around 5.2 percent by the end of 2023."

If you are interested in taking advantage of mortgage rates while they are lower, you could consider refinancing your home loan. You can visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.

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Home sellers add concessions to lure buyers

Homebuyers may find they have more negotiating power as sellers showed an increased willingness to provide concessions and cut prices, a recent Redfin report said.

Sellers have provided concessions to buyers in 41.9% of home sales during the fourth quarter, the report said. This is more than the previous high of 40.8% in the summer of 2020, when activity had almost stopped because of COVID-19. 

Homeowners are selling below their listed price in response to muted buyer demand, the report said. Twenty-two percent of final sales recorded by Redfin in the fourth quarter were made below the listing price and included concessions.  

"Buyers are asking sellers for things that were unheard of during the past few years," Van Welborn, a Redfin real estate agent in Phoenix, said. "They're feeling empowered, partly because their offer is often the only one, and partly because they know sellers have built up so much equity during the pandemic that they can afford to dole out sizable concessions."

If you are ready to shop for a mortgage loan, you can use the Credible marketplace to help you easily compare interest rates from multiple mortgage lenders and get prequalified in minutes.

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