Mortgage Interest Rates Forecast for April 2023
After nearly touching 7% at the beginning of March, unexpected problems in the financial markets helped shift the mortgage interest rate forecast for April 2023 to expectations for lower rates. Rates on 30-year fixed mortgages rose to 6.73% on March 9, 2023 — the highest 30-year conventional mortgage rates had been since November 2022 — then dropped to 6.60% for the week ending March 16, 2023, according to Freddie Mac’s Primary Mortgage Market Survey (PMMS).
What is the current mortgage interest rate forecast for April 2023?
The mortgage interest rate forecast for April 2023 is for lower rates, as long as investors continue to move money into Treasury bonds over concerns caused by a series of recent bank closures. That’s welcome news for mortgage seekers who just a few weeks ago were frustrated by a rise in rates sparked by unexpectedly persistent inflation pressures.
Although they could fall further, it’s not likely they’ll drastically decline, according to Jacob Channel, senior economist for LendingTree. Even though there’s a lot of uncertainty about the economy, the Fed is still poised to keep hiking the federal funds rate, which could put upward pressure on mortgage rates in the future, Channel said.
Mortgage rates this week
Rates continued to fall this past week after a recent string of bank closures in the U.S. and abroad triggered a “flight to safety,” which means investors purchased Treasury bonds. This caused a decline in Treasury yields, which are tied to mortgage rates, and helped push rates for all mortgage types lower, according to Joel Kan, vice president and deputy chief economist for the Mortgage Bankers Association (MBA).
Below are the U.S. weekly average rates compiled in the Freddie Mac PMMS as of March 16, 2023.
- 30-year fixed-rate mortgage: 6.60%
- 15-year fixed-rate mortgage: 5.90%
What current mortgage rate predictions mean for homebuyers
Your monthly payment, how much you qualify for and even how much home you can buy is directly affected by mortgage rates. Lenders divide your total debt by your before-tax income to determine your debt-to-income (DTI) ratio. A 43% maximum DTI ratio is the standard benchmark for payment affordability, and a lower monthly payment equals a potentially higher loan amount.
Fannie Mae, which sets rules for conventional mortgages, has delayed plans to assess an extra charge for a DTI ratio above 40% that was set to begin after May 1. The charge is still slated to kick in by August 1, when it may be passed down to you in the form of a higher mortgage rate, higher closing costs or both.
“For some borrowers, this recent drop in rates will provide them with a good opportunity to jump into the housing market,” Channel said. The dip in rates has already given purchase mortgage applications a boost, spurring a 7% increase in the purchase index, according to the MBA’s weekly mortgage applications survey for the week ending March 10, 2023.
That said, Channel says borrowers shouldn’t expect buying a home to suddenly become “cheap” or nearly as inexpensive as it was during most of 2020 and 2021 when rates were near record lows. Channel also cautions against rushing into a home purchase when you’re not ready just because rates have fallen.
The example below shows improvement in buying power from March 9 to March 16, for a qualifying homebuyer earning $85,000 per year with $250 per month worth of debt at a maximum 43% DTI ratio. Rates are still significantly lower than the Nov. 10, 2022, highs — when 30-year fixed rates peaked at 7.08%.
| 30-year fixed interest rate | Maximum payment at 43% DTI ratio* | Maximum home price |
|---|---|---|
| 6.60% | $2,795 | $403,713 |
| 6.73% | $2,795 | $399,934 |
| 7.08% | $2,795 | $390,065 |
*Payments include an estimated $800 annual homeowners insurance premium and $3,640 annual property tax bill.
What current mortgage rate predictions mean for refinancing in 2023
The recent decline in rates helped kickstart a 5% increase in refinance applications, although refinance activity is still down more than 70% from last year’s refinance levels, according to the MBA. Channel said there isn’t much reason to believe that a large number of other major banks will collapse, however, which means the lower rate environment could be short-lived.
The takeaway: If you come across a refinance rate that saves you money, lock it in, or you may be stuck with a higher rate in the future.
The example below illustrates how much you could save each month by refinancing a $350,000 30-year fixed-rate mortgage from the 7.08% high of last year to the 6.60% average Freddie Mac PMMS rate from March 16. We also calculated the break-even point — the amount of time it’d take to recoup refinance closing costs — by dividing an estimated $5,000 worth of costs by your monthly savings.
| Mortgage rate | Monthly payment, savings and breakeven |
|---|---|
| 7.08% | $2,930.71* |
| 6.60% | $2,818.62* |
| Monthly savings | $112.09 |
| Life-of-loan savings | $40,351.62 |
| Break-even point | 44.6 months |
*Monthly payment assumes $5,469 in annual property taxes and a $1,531 annual homeowners insurance premium.
How current rates affect your monthly payment over time
The table below shows the impact that the month-over-month jump in mortgage rates would have on a 30-year and 15-year term for a $300,000 loan.
| Month and year | Loan rate type | Average rate | Monthly payment (principal and interest) |
|---|---|---|---|
| February 2023* | 30-year fixed rate | 6.32% | $1,860.83 |
| 15-year fixed rate | 5.51% | $2,452.84 | |
| March 2023** | 30-year fixed rate | 6.60% | $1,915.98 |
| 15-year fixed rate | 5.90% | $2,515.39 |
*Rates based on Freddie Mac PMMS for the week ending Feb. 16, 2023.
**Rates based on Freddie Mac PMMS for the week ending March 16, 2023.
Faq update: Are higher rates pushing people out of the housing market?
Home prices have fallen somewhat since the start of the year as buyer demand has diminished due to the higher rate environment, Channel said. A lack of motivated sellers is keeping prices quite steep in most parts of the country, and Channel said until they start selling — or builders start breaking ground on new homes — prices will remain relatively sticky for some time.
Frequently asked questions
The Federal Reserve’s monetary policy indirectly impacts fixed-rate mortgages, which typically correlate with the 10-year U.S. Treasury bond yield. The Fed’s policies have a direct effect on short-term rates, such as those tied to ARMs, credit cards and auto loans.
A mortgage interest rate — expressed as a percentage — is the base rate you’re charged to borrow a loan. Your mortgage annual percentage rate (APR) is the total cost of borrowing a mortgage (the interest rate plus closing costs and fees) and is also expressed as a percentage.
Once you’re under contract on a home and moving through the mortgage application process, you should discuss mortgage rate lock options with your loan officer. Rate locks usually last between 30 and 60 days, or even longer. Keep in mind you may have to pay a rate-lock extension fee if your loan doesn’t close before your rate lock expires.
If you can negotiate for the seller to pay for a percentage of your closing costs, you might want to use the money to buy a discount point. Also called a mortgage point, a discount point is an upfront fee paid at closing to reduce your mortgage rate. One point is equal to 1% of your loan amount.
You can haggle for a lower interest rate by using your mortgage offers as leverage and asking each lender about matching your lowest-quoted rate. You should also consider making a larger down payment, selecting an ARM loan with a lower initial rate or asking your lender about mortgage buydown options.
Home prices have fallen somewhat since the start of the year as buyer demand has diminished due to the higher rate environment, Channel said. A lack of motivated sellers is keeping prices quite steep in most parts of the country, and Channel said until they start selling — or builders start breaking ground on new homes — prices will remain relatively sticky for some time.