Today's Mortgage and Refinance Rates: March 12, 2023 | Rising Rates are Hurting Homebuyers Again

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Homebuyers briefly got a bit of breathing room thanks to lower mortgage rates early this year, but as they've headed back up, affordability has again shrunk to historically low levels.

The average 30-year fixed mortgage rate is currently 6.73%. This is 64 basis points higher than it was at the beginning of February, according to Freddie Mac.  

"Mortgage rates continue their upward trajectory as the Federal Reserve signals a more aggressive stance on monetary policy," Sam Khater, Freddie Mac's chief economist, said in a press release. "Overall, consumers are spending in sectors that are not interest rate sensitive, such as travel and dining out. However, rate-sensitive sectors, such as housing, continue to be adversely affected. As a result, would-be homebuyers continue to face the compounding challenges of affordability and low inventory."

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Use our free mortgage calculator to see how today's mortgage rates will affect your monthly and long-term payments.

By plugging in different term lengths and interest rates, you'll see how your monthly payment could change.

Mortgage Rate Projection for 2023

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022.

But many forecasts expect rates to fall later this year. In their latest forecast, Fannie Mae researchers predicted that 30-year fixed rates will trend down throughout 2023 and 2024.

But whether mortgage rates will drop in 2023 hinges on if the Federal Reserve can get inflation under control.

In the last 12 months, the consumer price index rose by 6.4%. This is only a slight slowdown compared to the previous month, and the Fed is likely to take this as a sign that it still has more work to do.

If the Fed acts too aggressively and engineers a recession, mortgage rates could fall further than what current forecasts expect. But rates probably won't drop to the historic lows borrowers enjoyed a few years ago.

Should I Get a HELOC? Pros and Cons

If you're looking to tap into your home's equity, a HELOC might be the best way to do so right now. Unlike a cash-out refinance, you won't have to get a whole new mortgage with a new interest rate, and you'll likely get a better rate than you would with a home equity loan.

But HELOCs don't always make sense. It's important to consider the pros and cons.

HELOC pros

• Only pay interest on what you borrow
• Typically have lower rates than alternatives, including home equity loans, personal loans, and credit cards
• If you have a lot of equity, you could potentially borrow more than you could get with a personal loan

HELOC cons

• Rates are variable, meaning your monthly payments could go up
• Taking equity out of your home can be risky if property values decline or you default on the loan
• Minimum withdrawal amount may be more than you want to borrow

When Will House Prices Come Down?

Home prices are starting to decline, but we likely won't see huge drops, even if there's a recession.

The S&P Case-Shiller Home Price Index shows that prices are still up year-over-year, though they've been falling on a monthly basis. Fannie Mae researchers expect prices to decline 4.2% in 2023, while the Mortgage Bankers Association expects a 0.6% decrease in 2023 and a 1.4% decrease in 2024.

Sky high mortgage rates have pushed many hopeful buyers out of the market, slowing homebuying demand and putting downward pressure on home prices. But rates may start to drop this year, which would remove some of that pressure. The current supply of homes is also historically low, which will likely keep prices from dropping too far.

What Happens to House Prices in a Recession?

House prices usually drop during a recession, but not always. When it does happen, it's generally because fewer people can afford to purchase homes, and the low demand forces sellers to lower their prices.

How Much Mortgage Can I Afford?

A mortgage calculator can help you determine how much you can afford to borrow. Play around with different home prices and down payment amounts to see how much your monthly payment could be, and think about how that fits in with your overall budget.

Typically, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means your entire monthly mortgage payment, including taxes and insurance, shouldn't exceed 28% of your pre-tax monthly income.

The lower your rate, the more you'll be able to borrow, so shop around and get preapproved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than what your budget can comfortably handle.