The Russian invasion of Ukraine has only worsened the situation for everyone. The Federal Reserve has been gradually increasing the rates to show inflation down, but it doesn’t come without its costs. Most economists predict a recession that will inevitably impact the real estate industry.

As the Fed increases the rates, the interest rates of a conventional mortgage and any other loans have also increased. But in recent weeks, the interest rates are coming down gradually. For starters, the fixed-rate mortgages (FRM) have come down to 7.12% from 7.18%.

According to the economist Sam Kahter at American finance company Freddie Mac, “The economy remains buoyant, which is encouraging for consumers. Though inflation has decelerated, firmer economic data have put upward pressure on mortgage rates which, in the face of affordability challenges, are straining potential homebuyers”.

Reports in 2023 show that the interest rates have fluctuated quite a bit throughout the year. In February, it came to a 30-year low at 6.02%, while in August, it climbed up to 7.23%!

The changes in this range can predominantly be attributed to the consistent efforts of the Federal Reserve to reduce inflation, paired with the uncertainties shaking the banking sector. Events such as the Silicon Valley Bank collapse and the fallout from the U.S. debt ceiling can still be felt in the financial markets.

However, amid the chaos of the financial markets, the Federal Reserve may keep hiking the rates for at least a few more cycles.

On the contrary, considering the potential of an upcoming recession, it's plausible that we've already witnessed the peak of this current interest rate cycle. Nonetheless, it's worth noting that interest rates have always been known for their unpredictability and could easily creep up in any given week.

Experts from esteemed institutions such as First American, CJ Patrick Company, and Beeline, among others, predict that 30-year mortgage rate averages will increase, decrease, or stabilize as we move into October.

According to Jess Kennedy, the co-founder and COO at Beeline, “The economy is nearing an inflection point. As a result, mortgage rate volatility may continue until it is clear that the economic landing has actually occurred and we are not seeing a touch-and-go on growth that could reignite inflation. Eventually, as it becomes clear that the economy is on a stable path and inflation has retrenched, we expect to see mortgage rates trend lower. This could already be underway and may continue into October. Still, we may also get a surprise data reading that delays the eventual settling back of rates overall and mortgage rates specifically.”

Following a drop to the record-low in 2020 and 2021, mortgage rates saw their peak in 14 years back in 2022. Despite this recent upward trend, experts and industry leaders agree that these rates are primed to come down in 2023.

Regardless of its direction, it’s safe to say that current interest rates are below historical averages. If you’re a prospective homebuyer and potential borrower, you have a favorable lending environment ahead of you.