Mortgage rates are falling. How low can they go in 2023?

Amid uncertainties with the monetary policy, executives, analysts and economists don’t expect significant drops for 2023

Mortgage industry executives, analysts and economists have started to place their bets on where mortgage rates will settle in 2023 amid the Federal Reserve’s tightening monetary policy and the fears of an economic recession. Spoiler alert: don’t expect much, if any, relief for borrowers in the short term.

It’s true that after doubling over the course of a year, the 30-year fixed mortgage rate is trending downward at the close of 2022. On Thursday morning, a Freddie Mac survey showed this week’s rates at 6.27%, four basis points lower than the previous week. (Mortgage rates averaged 3.05% one year ago.) And Mortgage News Daily’s tracker clocked rates at 6.28% on Thursday, about 10 basis points lower than Wednesday.

Despite the small drop in mortgage rates in recent weeks, they won’t drop significantly any time soon, analysts and mortgage executives told HousingWire.

“Our baseline is not for the Federal Reserve to cut rates next year,” said Bose George, mortgage sector analyst at Keefe, Bruyette and Woods. “Spreads could tighten a little bit, and then maybe you get a mortgage rate that’s 5.75% to 6% something, which will be a slightly positive benefit to the market, but not much.”

“The Mortgage Bankers Association is assuming mortgage rates are down to the low fives in the next year. Their volume expectations are a little more positive than ours because that leads to an improvement in the back half of next year. But we’re not building that in at the moment,” he added.

The latest MBA mortgage finance forecast shows the 30-year fixed rate at 5.2% at the end of 2023.

“MBA expects the housing market and broader economy to remain volatile in early 2023, but with mortgage rates on a downward trajectory, prospective buyers could return to the market,” MBA president and CEO Bob Broeksmit said in a statement.

The lender outlook on mortgage rates

Those closer to the borrowers – the mortgage lenders – don’t expect rates to go significantly down either.

“I think we’ll be hovering around 6% to 8% for a little while. I don’t see any major items that would cause rates to drop in 2023,” said United Wholesale Mortgage’s chief strategy officer, Alex Elezaj.

“Nobody has the crystal ball to know, but we are making sure that as the next refi opportunity comes, our wholesale brokers have the tools in place to execute for their borrowers,” Elezaj added.

Sonu Mittal, head of mortgages at Citizens Bank, expects rates to stay where they are for at least the first half of 2023.

“Then we can see a downward trend, but nothing anywhere close to what we saw before,” he said. “I think rates will settle down somewhere in the middle 5s. But I’m sure you will see all the forecasts.”

According to Sam Khater, Freddie Mac’s chief economist, heading into the holidays, mortgage rates continued to decrease, which is helpful for potential homebuyers.

“But new data indicates homeowners are hesitant to list their homes,” Khater said in a statement. “Many of those homeowners are carefully weighing their options as more than two-thirds of current homeowners have a fixed mortgage rate of below 4%.”

Borrowers are hesitant because of a combination of high interest rates, a sense that a home price correction has to happen and that a recession is coming, according to David Battany, executive vice president of capital markets at Guild Mortgage.

“It’s the combination of the actual math of a higher payment or just the psychological effect of rates being really high and home prices probably softening,” Battany explained.

To illustrate the impact of higher mortgage rates, the monthly payment for a median-priced home is currently more than $2,000, a 64% increase from a year ago, according to‘s manager of economic research, George Ratiu. “First-time homebuyers are struggling with high consumer prices, property values and interest rates, which are pushing savings rates to very low levels and delaying their ability to gather a sufficient down payment,” Ratiu said in a statement.

At the same time, Ratiu said, current homeowners looking for their next home “are finding that the prospect of higher prices and, in many cases, double or triple their current interest rate, are causing them to rethink their decision to move.”


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