It’s a question that’s on the minds of many would-be refinancers. Here’s what the experts are saying:
- Fannie Mae sees a slight uptick in 2023, with the average 30-year fixed rate creeping up to 7.1% by the year’s end. And bets the rate will fall below 6% in 2025. In between, Fannie Mae forecasts a stable rate of 6.5% in 2024.
- The Mortgage Bankers Association (MBA) takes a different view. Predicting a slowdown in the U.S. economy in the first half of 2024, the MBA foresees a rate decline. After hovering just above 6% until spring 2024, rates will drop to 5.4% if the MBA prediction is correct.
- Wells Fargo also foresees a drop below 6% in the third quarter of 2024. Until then, Wells Fargo sees the 30-year conventional mortgage rate landing at 7.1% in the third quarter of 2023 and at 6.75% in 2023’s fourth quarter.
- The National Association of Realtors says we’ll see mortgage rates drop to 6.3% by the end of 2023 and fall further to 6% in 2024.
- Realtor.com’s outlook for 2023 predicts a slight decline, with rates decreasing to 6.1% by the year’s end.
Does everyone get the average rate?
No. The average rates these experts cite will not be the same for every borrower, with some getting higher and some getting lower than the average rate. It comes down to the general lending approach of “risk-based pricing.” Lower-risk borrowers (with higher chances of paying back lenders) usually get lower rates.
Here are some factors lenders use to determine your rate:
- Credit score. A high credit score often translates to a lower rate. The Consumer Financial Protection Bureau categorizes borrowers with credit scores over 720 as “super prime,” and those in the 660 to 719 range as “prime.” Scores between 620 and 659 are considered “near prime,” while a score under 619 is labeled “sub-prime.”
- Debt-to-income ratio. Or DTI — how much you earn each month compared to how much you owe. With a DTI of 35% or less, borrowers can expect a favorable rate.
- Employment history. Few things put a lender at ease like a stable employment record.
- Debt payment. Would-be borrowers who have paid their debts (such as credit cards, mortgages, and other loans) on time can expect improved chances of getting an attractive rate.
Interest rates inevitably fluctuate. What never changes is First United’s commitment to offering the best possible financing options to meet the diverse needs of every type of borrower. Connect with us online or call us at (972) 591-3097.