February mortgage rates forecast

Mortgage rates may fall in February as Federal Reserve prepares the next chapter of its inflation-busting campaign.

In January, the 30-year fixed-rate mortgage reached its peak and then fell. Although it is premature to say that the 30-year fixed-rate mortgage has reached its peak in January 2023, it is possible.

The average 30-year mortgage rate was 6.48% for the week ended Jan. 5. It then dropped to 6.13% the following three weeks.

Redfin’s chief economist Daryl Fairweather says, “It’s because the economic outlook is better.” “It appears that inflation is under control, and the Fed will slow down its rate increases. ”

Beating inflation

Since the beginning of 2022, mortgage rates have been driven by high inflation and efforts of the Federal Reserve to control it. The Fed responded late last spring to rapidly rising prices by imposing an aggressive series interest-rate hikes. Unfortunately, mortgage rates have soared. The good news is that inflation is on the decline.

Mortgage rates are falling as inflation declines. The Federal Reserve is now reducing the severity of its increases.

Looking for 5s by the end of this year?

Mortgage rates will not fall in a straight line if they are falling as predicted. There will be daily, weekly and monthly ups and downs. Fairweather predicts that the 30-year mortgage rate will fall to the 5% level by the end the year, as we expect the current high inflation environment to recede. ”

According to the Mortgage Bankers Association, the 30-year mortgage rate will continue to fall this year and average 5.2% during the fourth quarter. The MBA predicts that inflation will also fall steadily — from an average 5.6% in quarter one to 3% in quarter four.

Joel Kan, vice president of the MBA and deputy chief economist, stated that lower mortgage rates will encourage homebuying. In a press release, Kan stated that although homebuying activity is still slow, if rates fall further and home prices cool further we expect to see potential buyers return to the market.

What was January?

NerdWallet forecasted that mortgage rates would rise in January due to persistently high inflation and uncertainty over the Fed’s future path. It was not completely wrong. Mortgage rates rose at the start of January, then fell, and then went back up. They fell more than they rose. The January average 30-year fixed rate mortgage rate was 6.3%, compared to December’s average of 6.88%.

A positive Consumer Price Index resulted in a decline in mortgage rates. January 12th’s December CPI report showed that year-over, inflation had fallen to 6.5%. The month-over-month numbers were even better. The December figures showed that overall prices dropped 0.1%, primarily due to declines in fuel prices.

Inflation cues affect interest rates, and the December CPI report sent the message that inflation was retreating. This resulted in a slight drop in mortgage rates.