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Mortgage Rates Forecast: Will Rates Go Down in September 2023?

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The mortgage rates forecast is for higher rates in the short term. Mortgage rates spiked to their highest level since 2001, with the average 30-year fixed-rate mortgage hitting 7.18% on Aug. 31, 2023, according to Freddie Mac’s Primary Mortgage Market Survey®. Ongoing economic strength and persistent inflation sparked investor fears that the Federal Reserve may need to hike rates further, dimming hopes that mortgage rates will drop in September.

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Mortgage rates this week

Current 30-year-fixed mortgage rates are averaging 7.57%

The average rate for a 15-year fixed mortgage is 6.73%

Current average rates are calculated using all conditional loan offers presented to consumers nationwide by LendingTree’s network partners on the previous day for each combination of loan program, loan term and loan amount. Rates and other loan terms are subject to lender approval and not guaranteed. Not all consumers may qualify. See LendingTree’s Terms of Use for more details.

 

Mortgage interest rates forecast for September 2023

Mortgage rates marched higher for the fifth consecutive week, as nervous bond investors drove up U.S. bond yields while anticipating that the Federal Reserve may not be done raising rates. Despite the Fed’s efforts, American households are still seeing price increases beyond the 2% target the Fed is aiming for, said Jacob Channel, LendingTree’s senior economist.

Homebuyers and homeowners hoping for lower rates may see more sustained declines in 2024, although Channel expects rates will remain high compared to the levels seen during the height of the pandemic.

Adjustable-rate mortgage volume picked up as homebuyers searched for ways to lower their monthly payments. The ARM share of the Mortgage Bankers Association’s weekly mortgage applications survey rose 7.6% for the week ending Aug. 18, 2023. That’s the highest level of ARM applications in five months, according to Joel Kan, MBA’s vice president and deputy chief economist.

Will interest rates go down for homebuyers in September?

Fall home seekers aren’t likely to see lower rates in September. That’s making it hard for the majority of would-be homebuyers to navigate today’s housing market, Channel said. Though buying is possible, anyone looking to get a mortgage should plan to save extra for a down payment, work hard to boost their credit scores and shop around for the best offers from a range of lenders, he added.

Higher rates impacted existing-home sales in July, which dropped 2.2% month over month, according to latest data from the National Association of Realtors. NAR Chief Economist Lawrence Yun cites two factors driving the drop in sales: a lack of housing inventory and higher mortgage rates.

Homebuyers counting on a drop in home prices to offset higher rates may be frustrated to learn that the median existing-home price in July 2023 for all housing types was $406,700 — a 1.9% increase from the $399,000 median price in July 2022.

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Mortgage rates predictions for refinancing in 2023

Refinancing doesn’t make sense for most homeowners sitting on low rates they got during the pandemic, Channel said. There are a few niche circumstances when a refinance might make sense, such as refinancing an ARM loan to a fixed-rate loan, Channel added.

Surprisingly, the MBA survey reported a slight uptick in refinance applications. The sudden rise above 7% may be motivating homeowners who can benefit from a refinance to apply now rather than risk even higher future rates.

Current refinance rates for September 2023

Current 30 year-fixed mortgage refinance rates are averaging 7.81%

The current average rate for a 15-year fixed mortgage refinance is 6.89%

Current average rates are calculated using all conditional loan offers presented to consumers nationwide by LendingTree’s network partners on the previous day for each combination of loan program, loan term and loan amount. Rates and other loan terms are subject to lender approval and not guaranteed. Not all consumers may qualify. See LendingTree’s Terms of Use for more details.

 

How to get the best mortgage rates

1. Boost your credit score

Pay your bills on time, minimize your credit card balances and avoid opening several new credit accounts at once. You’ll get the best conventional mortgage rates with a credit score of 780 or higher.

 Learn more about ways to boost your credit score.

2. Compare rates from multiple lenders

LendingTree data consistently show that consumers who shop around for mortgage rates typically save money. Check out the rates and costs from at least three different mortgage lenders and pick the best match for your finances.

 Learn more about our picks for the best mortgage lenders.

3. Consider paying points

A mortgage point costs 1% of your loan amount, and paying for points allows you to buy a cheaper interest rate. Read the fine print if you see an online rate that looks lower than what other lenders are offering — there’s a good chance you’ll pay points to get it.

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Frequently asked questions

“For there to be an outright crash, we’d need to see the housing market flooded with homes for sale, and that probably won’t happen as long as homeowners can continue to afford their mortgages,” Channel said. Homeowners seem well-equipped to keep making payments, as evidenced by data that show a shrinking foreclosure inventory and a low rate of serious delinquencies, Channel added.

The Federal Reserve’s monetary policy indirectly impacts fixed-rate mortgages, which are often tied to the 10-year U.S. Treasury bond yield. The Fed’s policies have a direct effect on loans with variable interest rates, including ARMs, credit cards and home equity lines of credit (HELOCs).

Haggle for a lower interest rate by using your mortgage offers as leverage. Ask each lender about matching your lowest-quoted rate. Consider making a larger down payment, select an ARM loan with a lower initial rate or ask your lender about your mortgage buydown options.

“In the longer run, cooling inflation and an end to the Fed’s current rate hiking cycle should help bring mortgage rates down,” Channel said. On the other hand, hot inflation, additional pressure on rates from the Fed and waning demand for U.S. bonds could push rates higher, he added.

Recent MBA weekly applications survey data show an increase in ARM applications. As homebuyers face the reality of mortgage rates at 20-year highs, they may seek the temporary relief that ARM rates initially provide.

Discuss mortgage rate lock options with your loan officer once you’re under contract on a home and moving through the application process. Rate locks usually last between 30 and 60 days, or even longer. Watch your expiration date; you may have to pay a rate lock extension fee if your loan doesn’t close before your rate lock expires.

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.

Mortgage rates dropped to a historical low of 2.68% in December 2020, when the Federal Reserve cut the federal funds rate to 0% to stabilize the post-COVID economy.

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