After a turbulent 2022, mortgage interest rates have been relatively stable this year, with the average 30-year fixed rate largely treading in a half-point range between 6.25% and 6.75%. And, while hyperbole is likely to dominate the headlines over the next few weeks with yet another debt ceiling standoff in Congress, the mortgage bankers at Proper Rate, @properties Christie’s International Real Estate’s affiliated mortgage lender, don’t see a whole lot of volatility in the long term.
That’s one takeaway from a recent conversation with Proper Rate’s VP of Sales, Dan Moran, who sat down with the editors of the At Home blog to field questions on rates and other topics. Read on for an (almost) mid-year mortgage update.
At Home: So, probably the first question you get wherever you go…what’s your outlook for mortgage rates for the rest of 2023?
Moran: We’re looking at rates to remain relatively flat for the rest of the year. The more optimistic viewpoint is that we’ll see the 30-year fixed get back down into the 5’s, and market expert, Barry Habib, recently said this could happen as soon as mid-July. The more conservative predictions are that we’ll be in the 6% range for most, if not all, of 2023.
At Home: Interest rates and low inventory levels are dominating the conversation around home sales this year. Which do you think has had a greater impact?
Moran: Rates shot up in 2022, and it paralyzed the market. But now a lot of buyers have adjusted – both financially and mentally/emotionally, and there’s a lot of demand out there. So, at this point, it feels like inventory is a bigger drag, but they are connected. There’s a lot of talk about homeowners with 3% mortgages, who don’t want to let go of that rate. That could be one factor contributing to lower inventory, but it’s not the only one – and probably not even the biggest one. Remember that inventory was low before rates went up.
At Home: Will we ever see rates come down to that 3% level again?
Moran: The short answer is I don’t think so. The slightly longer answer is I’d be concerned about the overall economy if we got to that level again, because the circumstances that would precipitate those rates wouldn’t be good for a lot of people.
At Home: You said the fact that a lot of homeowners are locked into super-low mortgage rates isn’t necessarily the biggest factor curbing sales activity. But what about the potential homebuyer who’s looking at trading out of a 3% mortgage into a 6% mortgage?
Moran: It’s been said a million times that 2020 and 2021 were not normal markets. Today, we’re in a more normal market. And you could even make the argument that we’re in a more normal mortgage rate environment, historically speaking. In a normal market, most people are going to move not because of a pandemic or because of an interest rate, but because their stage in life – new job, marriage, growing family, retirement, second home, etc. – dictates a move. If you’ve got a mortgage in the 3s or even the 2s, God bless you. But when life happens, most people are going to buy and sell real estate based on their needs.
I would also say don’t just focus on your interest rate. Look at the total cost of ownership. For example, if you’re downsizing from a large home, not only is the new home going to be less expensive, but so are the taxes, utilities, maintenance costs, etc. So, even if you’re trading a 3% rate for something in the 6’s, you could actually be lowering your costs. And, of course, you can always refinance. So don’t let rate hold you back.
At Home: Home prices have gone up a lot, so are you seeing more demand for jumbo mortgages*?
Moran: This is a topic that hasn’t gotten nearly enough attention – not jumbo mortgages, per se, but rather the huge increase in the conforming loan limit that has made jumbo loans much less of a factor, especially in a moderately priced market like Chicagoland. In the last two years, the conforming loan limit has increased to $726,200. Just a few years ago it was $417,000. This has given a lot more borrowers access to conforming loans, and that means a wider range of products, more streamlined underwriting and approvals, and generally just an easier path to obtaining a mortgage. If you think about all of the homes in our area that sell between roughly $500,000 and $1,000,000, it’s a huge impact and a huge positive for our market.
And as far as jumbo mortgages, we’re actually seeing 30-year rates that are slightly lower than conforming loans at the moment, so it’s not a bad time to be in that market.
At Home: Any other advice for borrowers in 2023?
Moran: Now more than ever, if you’re buying a home, talk to your lender about strategies for competing with multiple offers and cash offers. We’ve set up new programs specifically to deal with this situation because it is so prevalent in today’s market. We can really strengthen a buyer’s hand and give them a fighting chance to get the home of their dreams, even if they’re up against a cash buyer.
For more information about Proper Rate’s mortgage lending services, visit www.properrate.com, or talk to your @properties agent for a referral to an experienced loan officer.
*Jumbo mortgages are mortgages that exceed the conforming loan limit set by the Federal Housing Finance Association. The conforming loan limit for 2023 is $726,200 in most U.S. counties, including those in the Chicagoland area, and $1,089,300 in certain high-cost markets.