Mortgage lending predictions for 2023

by Timothy Inklebarger

Featuring the perspectives of:

Jeremy Collett, Executive Director of Capital Markets, Guaranteed Rate
Lysa Griffith, Senior Vice President of Mortgage Lending, OriginPoint
Julie Johnson, Regional Vice President, CrossCountry Mortgage
Rob Walworth, Vice President of Mortgage Sales, BECU

Will interest rates continue to rise next year, and what impact will rates have on the market?

Griffith: I think interest rates will come down next year as long as inflation comes down as expected. Mortgage rates tend to fall when the economy cools as well.

Collett: We can make educated guesses, but rates are hard to predict. The Fed just raised their federal funds rate to 3.75%-4% on Nov. 2, indicating that more rate hikes are coming. We think that this cycle of aggressive rate hikes is coming to an end soon, dependent on inflation coming down. We could see the Fed raising rates by 0.5% at their December meeting, then 0.25% in 2023, until their rate sits at 4.75%-5%. If that happens, mortgage rates could fall.
What buyers should remember is that they can “marry the home, date the rate.” In other words, find a home they love and be prepared to refinance when mortgage rates come down.

Walworth: That depends on how well the Fed determines current hikes have been on reducing inflation.
Johnson: There’s no crystal ball. Even when economists say rates are going to go down, anything can happen. If the market follows history, rates will go down.

What should homebuyers be watching regarding mortgages?

Walworth: With interest rates up, qualifying mortgage payments are also up. It’s important for homebuyers to shop for the right program and the right price. It could make the difference in qualifying or not. For first-time homebuyers, finding a home-buying seminar, like the ones BECU offers, is a great way to learn about the process and build a relationship with a mortgage advisor. Having support from an advisor with access to a variety of programs and features that you trust will help buyers identify savings opportunities. It’s also important to ask who will service your mortgage, as that relationship will extend well beyond the buying process. It may be the same lender providing the financing, or your loan may end up sold to another lender, and that may be important to know.

Johnson: In every market, there’s always opportunity. If someone is ready to buy, they shouldn’t let the market slow them down unless they have a personal situation. Homebuyers should remember that you can always refinance your interest rates, but you can’t refinance your purchase price.

Collett: First-time homebuyers and communities that have traditionally suffered with affordability issues should keep a close eye on recent enhancements made by Fannie Mae and Freddie Mac. The current administration and Federal Housing Finance Agency (Fannie and Freddie’s regulator) have been laser-focused on opening up affordability and creating products that allow for further home ownership opportunities for this segment of the market.
Just this week, they announced that four groups will see their upfront loan fees — also called guarantee fees or “G-fees” — eliminated when using conventional loans backed by Fannie Mae or Freddie Mac. These groups include low- to median-income first-time homebuyers, buyers using the HomeReady or Home Possible loan programs, buyers using the HFA Advantage or HFA Preferred loans and single-family loans that fall under the Duty to Serve program.

Griffith: Trying to time the market or waiting too long to buy. We are coming off years of buyers feeling like they cannot compete to win a home. Now there is a window of opportunity to pay less for a home, be out of pocket less for down payment and closing costs, and have a smaller mortgage. Sellers are often willing to contribute to a permanent or temporary buydown for the buyer which can help keep the interest rate and monthly payment lower. Once mortgage rates come down, the housing market could easily get very competitive again.

What will be the biggest challenges and opportunities for lenders in 2023?

Johnson: When rates go down, more people will be buying and refinancing. It’s going to be important to make sure lenders are well staffed and can hire great people to ensure clients have a great experience. That’s both a challenge and an opportunity.
I’ve been doing this for over 25 years, and I’ve seen all types of markets. Things will come back. We live in such a great country, and housing is so important. We will get through this.

Walworth: Rising rates and increasing home prices will be a challenge for buyers and lenders in 2023, but there are opportunities available as well. Sellers are offering concessions now that were unusual prior to this year. Additionally, there are buyer assistance programs available to help with financing, and lenders are investing more than ever in meeting the needs of historically underserved communities. So, whether you are a lender or a buyer or working in real estate, it remains critical to connect with trusted professionals who can identify the best ways to meet your home-buying goals.

Griffith: If mortgage rates come down, there will likely be a refinance opportunity for buyers who purchased in the last 6 to 8 months. The housing market may turn competitive if rates fall as well. Lenders could face staffing challenges and also see their pool of loans pay off early if buyers elect to refinance.

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