Mortgage and Refinance Rates Drop: July 19, 2023 Update

**July 19, 2023**

In an unexpected move, the Federal Reserve announced during its June 14 meeting that it would not be raising interest rates. This decision has left housing analysts divided on its implications for the housing market and the overall economy. Some argue that this is a temporary pause in the Fed’s fight against inflation, while others believe it signals a potential recession on the horizon.

Lisa Sturtevant, chief economist at Bright MLS, a large multiple listing service in the Middle Atlantic region, believes that the Fed’s goal of 2 percent inflation means that rate increases will likely resume in the future. Sturtevant states, “It is extremely unlikely that the Fed will back down from that goal, since they have been out so forcefully and consistently with the intent to reach that milestone.” She suggests that the Fed’s decision to postpone rate increases may lead to a mild recession either by the end of this year or the beginning of next year.

## Current Mortgage Rates

As of July 19, 2023, mortgage rates have decreased across the board. The average rates for a 30-year fixed mortgage is at 7.15%, a decrease of 17 basis points from the previous week. Rates for a 15-year fixed mortgage have dropped to 6.46%, a decrease of 11 basis points. The average rate for a 5/1 adjustable-rate mortgage (ARM) is currently at 6.24%, a decrease of 1 basis point. Lastly, for jumbo loans, the average rate is at 7.18%, a decrease of 14 basis points.

## Choosing the Right Mortgage Term

When it comes to choosing a mortgage, borrowers have different options in terms of loan terms. The most popular loan term is the 30-year fixed mortgage, but it’s important to consider the advantages and disadvantages of this option. While the 30-year term offers lower monthly payments and stability, it also results in more total interest paid and slower equity growth. Additionally, it may tempt borrowers to buy a more expensive house than they can afford.

On the other hand, a 15-year fixed mortgage offers higher monthly payments but allows borrowers to save thousands of dollars in total interest and build equity at a faster rate. ARMs, which have become more popular as rates have risen, offer initially lower payments but come with the risk of rates increasing in the future.

Ultimately, the choice of mortgage term depends on the individual’s financial goals and circumstances. It’s important for borrowers to carefully consider their budget, long-term plans, and risk tolerance before making a decision.

## The Importance of Shopping Around

A key piece of advice for borrowers is to shop around and compare mortgage offers from multiple lenders. Research by mortgage giant Freddie Mac has shown that the payoff for bargain-hunting borrowers became even more significant during the interest rate run-up of 2022. Mark Hamrick, Senior Economic Analyst for Bankrate, emphasizes the importance of seeking the best deal on a mortgage to save money in the long run. Hamrick states, “Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

## Outlook for Mortgage Rates

With the recent decision by the Federal Reserve to hold off on raising interest rates, the days of historically low mortgage rates are likely behind us. Rates have been steadily rising, and economists predict that this trend may continue. As the economy rebounds and inflation persists, mortgage rates could see further increases. Borrowers should be prepared for higher rates and consider locking in a mortgage sooner rather than later.

## Conclusion

The Federal Reserve’s decision not to raise interest rates has sparked a debate among housing analysts about the future of the housing market and the economy. While some believe this is just a temporary pause, others warn of a potential recession. Meanwhile, mortgage rates have decreased across the board.

Borrowers should carefully consider their options when choosing a mortgage term, taking into account their financial goals and circumstances. It’s important to shop around and compare offers from multiple lenders to find the best deal. As rates are expected to continue rising, borrowers should be prepared for higher mortgage rates in the future.