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Two New Forecasts for California Mortgage Rates in 2023

Summary: California mortgage rate forecasts for 2023 suggest that rates could decline gradually next year, from their current level. But those predictions are the equivalent of an educated guess, so they’re far from certain.

California mortgage rates have risen quite a bit during 2022, and that has many home buyers wondering what’s in store for 2023. One of the most common questions among future borrowers is:

Will California mortgage rates keep rising or go down in 2023?

The truth is, no one can predict future mortgage rates with complete accuracy. Many different variables can influence consumer interest rates, and that makes long-term predictions difficult.

With that being said, it seems that mortgage rates in California have begun to level off, after a long period of steady increases. And a pair of recent industry forecasts suggest that California mortgage rates might actually decline in 2023, compared to where they are now.

Interest Rates Rose Steadily During 2022

Last week, researchers from Freddie Mac reported that the average rate for a 30-year fixed mortgage loan was 6.58%. That marked a decline from the previous week’s average.

To quote the November 23, 2022 Freddie Mac report:

“In recent weeks, rates have hit above seven percent only to drop by almost half a percentage point. This volatility is making it difficult for potential homebuyers to know when to get into the market, and that is reflected in the latest data which shows existing home sales slowing across all price points.”

But overall, mortgage rates have risen significantly during 2022. A year ago, the average rate for a 30-year fixed home loan was hovering just over 3%. That means they’ve more than doubled over the past 12 months (as of November 2022).

A Cooler Housing Market Going Forward?

The increase in mortgage rates is one of several factors that have created a cooling effect within the California real estate market. The short version is that higher housing costs have reduced demand, leading to fewer and slower home sales. This is true for the nation as a whole, not just the Golden State.

While rising mortgage rates are an unwanted trend among home buyers, it could actually create a more buyer-friendly real estate market in California.

Over the past two years, the housing market accelerated like never before, forcing buyers to compete fiercely for limited inventory. Those trends also boosted home prices to record highs, in cities all across California.

Today, as we approach the end of 2022, the real estate market is moving at a slower pace. That’s good news for home buyers, because it gives them more time to consider each individually property without feeling rushed to make an offer.

But getting back to the question at hand, what will California mortgage rates do in 2023? According to a pair of recent forecasts, home loan rates might be peaking right now and could actually decline during 2023.

Mortgage Rate Forecasts for 2023

A pair of mortgage rate forecasts issued over the past two months have predicted a gradual decline throughout 2023. So let’s take them one at a time.

  • Forecast #1: Back in October, economists from Freddie Mac predicted that mortgage rates in California and nationwide would trend downward over the next 12 months. Specifically, they offered a quarter-by-quarter prediction that 30-year mortgage rates would average 6.6% at the start of 2023, and decline to around 6.2% by the end of next year.
  • Forecast #2: A more recent forecast predicted a similar trend, but with a steeper decline. This one was issued by the Mortgage Bankers Association (MBA) on November 21 of this year. Analysts from MBA expect 30-year mortgage rates in California to average around 6.2% during the first quarter of 2023, and fall to an average of 5.2% by the last quarter of that year.

It bears repeating: mortgage rate predictions are the equivalent of an educated guess and therefore far from certain. Previous forecasts like those mentioned above have turned out to be less accurate, due to unforeseen circumstances.┬áSo we probably shouldn’t get too wrapped up in the exact numbers being projected here.

The broader point is that many housing analysts and economists expect mortgage rates to level off into the start of 2023, and then subsequently decline to some degree.

Ready to Explore Your Financing Options?

Do you plan to buy a home in California in 2023? Do you need a mortgage loan to help make that happen? If so, we can help!

Located in the Bay Area, Bridgepoint Funding servers home buyers and homeowners all across the Golden State. We offer a wide variety of home loan options, including FHA, VA and conventional. We also provide jumbo financing for amounts well over $1 million. Please contact us if you have mortgage-related questions or would like to apply for a loan.

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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