Mortgage Interest Rates Forecast for August 2023
- Expertise: Mortgage, personal finance, financial literacy, debt management and real estate investing
- Education: University of Arizona
Denny Ceizyk has been a senior writer covering LendingTree’s mortgage content since 2019; he has covered the mortgage industry since 2007. Besides writing home loan articles for LendingTree, Denny contributes expert commentary for national publications including MarketWatch, the New York Post, AARP, Realtor.com and Money magazine.
Before joining LendingTree, Denny spent 25 years in the mortgage industry advocating for and educating homeowners to help them make the best mortgage decisions. He has worked in the institutional mortgage banking world, having owned and operated a mortgage brokerage company for 18 years.
Denny earned a bachelor’s degree in media arts from the University of Arizona and has advocated for financial literacy initiatives at both the state and local government level over the past 30 years.
- Expertise: Mortgages, homebuying, housing market, personal finance
- Education: University of Georgia
Crissinda Ponder is the mortgage managing editor at LendingTree, where she develops and maintains a range of content related to residential mortgage lending and the homebuying process. Prior to her current role, she served as a senior mortgage writer at LendingTree.
Her background includes serving as a content editor — focused on personal finance and higher education content — with ABUV Media (MoneyGeek.com, HigherEducation.com), and as both a mortgage reporter/analyst and insurance reporter/analyst for Bankrate.com. She has also served as a contributing writer for TheBalance.com, producing content for the site’s mortgage, insurance and savings verticals.
Crissinda earned her B.A. degree in journalism from the Grady College of Journalism and Mass Communication at the University of Georgia.
Current mortgage rates may drop in August
After spiking to almost 7% in the middle of July, mortgage rates are slowly marching downward, with 30-year fixed mortgage rates at 6.81% as of July 27, 2023, according to the Freddie Mac Primary Mortgage Market Survey (PMMS). The August mortgage interest rates forecast is for rates to continue a gradual decline, as long as inflation stays in check and the economy doesn’t start heating up.
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Mortgage rates this week
Below are the U.S. weekly average rates compiled in the Freddie Mac PMMS, as of July 27, 2023.
- 30-year fixed-rate mortgage: 6.81%
- 15-year fixed-rate mortgage: 6.11%
Mortgage rate predictions for August 2023
Mortgage rates are caught in a tug-of-war between inflationary-friendly readings on consumer prices and a job market that remains strong despite economic headwinds. When inflation reports show consumer prices dropping, rates drop. The same is true for economic reports like the monthly jobless claims — if claims are up, rates are down, if the job market is robust, rates head north.
“Investors often focus on the job market because whether or not companies are hiring or firing people is seen as a good indicator of how likely the economy is to grow or shrink,” said Jacob Channel, senior economist for LendingTree. Although mainstream economic theory suggests interest rates rise in tandem with higher unemployment rates, Channel admitted it may take a while for higher rates to impact unemployment.
“Historically, unemployment doesn’t appear to rise noticeably until after interest rates have been kept high for a little while,” Channel explained. The key takeaway: Mortgage rates are likely to remain where they are if we continue seeing a strong job market.
Mortgage rate predictions for homebuyers
Homebuyers continue to react favorably to any dips in mortgage rates, and jump back on the fence when rates rise. Unadjusted purchase applications were down 2%, according to the Mortgage Bankers Association’s weekly mortgage applications survey for the week ending July 21, 2023.
The reason is simple: Mortgage rates have a direct impact on your monthly mortgage payment, how much you qualify for and ultimately how much house you can buy. Lenders base your maximum loan amount on your debt-to-income (DTI) ratio, which divides your total debt by your before-tax income. A lower monthly payment equals a higher loan amount to buy a higher-priced home. A higher rate equals a higher payment, which reduces your buying power.
“The higher the rate you get on a loan, the more your monthly payments will be and the less you can afford,” Channel said. A lack of supply, and persistently steep home prices, make it a tough environment for homebuyers, Channel added.
Mortgage rates forecast for refinancing
Very few homeowners have an incentive to refinance with rates tempting the 7% threshold. However, lower rates tend to move the needle on the refinance index component of the MBA’s weekly application survey: The July 21 survey showed a 0.4% decrease in refi application volume from the prior week.
“Given that many homeowners still have record low fixed rates they got during the pandemic, refinancing isn’t going to be the preferred option for most,” Channel said. Even if rates start to fall this year or in 2024, Channel said anyone expecting rates to return to the low levels reached during the pandemic is going to be disappointed.
Not sure if you should refinance? Learn more about when is the right time to refinance.
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 a lot of new credit accounts at once. You’ll get the best conventional mortgage rates with a credit 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 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 other lenders — there’s a good chance you’ll pay points to get it.
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.
“If the Fed announces an end to their current rate hiking cycle, then mortgage rates could start to trend down over the remaining months of 2023,” Channel said.
Rates aren’t likely to rise with the Fed winding down the size and frequency of rate hikes. However, Channel says that rates probably won’t plummet whenever the rate hikes end; instead, consumers should expect rates to drop to the 6% to 6.5% range.
Probably not. Although it’s harder for people to buy and sell right now, Channel explained mortgage delinquency rates are low and millions of current homeowners are able to afford the record low rates they locked in during the pandemic.
Mortgage rates dropped to a historical low of 2.68% in December 2020, as the Federal Reserve cut the fed funds rate to 0% to stabilize the post-COVID economy.
An adjustable-rate mortgage may offer some temporary payment relief, with initial rates that are typically lower than fixed-rate mortgages. Just have an exit plan — once the teaser rate period expires, ARM rates usually adjust each year, though some may adjust more frequently based on your loan terms.