NAB has hedged bets on a 3.60% peak by March 2023, while CommBank forecasts a more dovish approach, with another 25 bp rise in February bringing the terminal cash rate to a rest at 3.35%. Currently, the end-of-year cash rate sits at 3.10% for 2022.
After home financing costs nearly doubled in 2022, some relief is in sight for potential homebuyers in 2023. The interest rate for a 30-year fixed-rate mortgage in the U.S. is expected to drop to 5.25% by the end of this year, according to a forecast by the financial services website Bankrate.
And for the average owner-occupier paying a variable rate, your home loan rate could reach 6.61% by the first half of 2023. For February (the next RBA meeting) all the big four banks have forecast another 25 basis points hike to the cash rate.
Top-yielding one-year and five-year CDs should reach 1.25 percent and 1.75 percent, respectively, while the average rate on a money market and savings accounts should reach 1.05 percent by the end of 2022.
The Fed's key benchmark borrowing rate is projected to rise another three-quarters of a percentage point in 2023, hitting a 17-year high of 5-5.25 percent from its current 4.25-4.5 percent level, according to the Fed's median projection from December.
Will interest rates go up or down? An interest rate forecast by Trading Economics as of 15 December predicted the Fed Funds Rate would hit 5% in 2023, before falling back to 4.5% in 2024.
Interest Rates Will Go Up
The average rate on a 5-year fixed mortgage is forecast to rise by 0.3% this year, rising further to 1.2% next year and 2.1% in 2024.
Freddie Mac's forecast
In its most recent Economic and Housing Market Outlook, Freddie Mac expects the 30-year fixed-rate mortgage averaging 4.6% in 2022, rising as high as 5.0% in the fourth quarter.
Fed officials do expect to begin lowering rates in 2024, but they anticipate bringing them down slowly.
Assuming these variable- and fixed-rate mortgages renew at median rates of 4.4 and 4.5 per cent in 2025–26, the central bank forecasts that mortgage holders will face an average monthly payment increase of 30 per cent upon renewal.
“Our view that interest rates will be reduced from 4.5 per cent to three per cent by the end of 2024 envisages more cuts than either the consensus or the markets.”
Most borrowers are attracted to the certainty a fixed-rate home-loan product offers, especially those who are budget-conscious. In fact, it is advisable for first-home buyers to take on a fixed-rate loan to be able to organize their budgets easily and to stay on top of their repayments.
Evangelou expects rates to average around 5.7% in 2023. That's significantly higher than the rates around 3.5% that buyers saw in the first months of 2022, but it's also a far cry from the rates that climbed above 7% last fall.
Goldman Sachs: The investment bank projects that the fixed 30-year mortgage rate is poised to average 6.2% in 2023.
In December 2023, the average rate on a five-year fix will be 4.48pc, just below the Bank Rate at 4.5pc, Capital Economics forecast. In January 2024, mortgage rates will fall again to 4.37pc, before the Bank Rate drops to 4.25pc the following month.
Australian interest rate forecast for 2023
Economists at Westpac and ANZ suspect the RBA will have to raise the cash rate by another 75 basis points to address the inflation challenge. This would give us a terminal rate of 3.85% by May 2023.
NAB: Early 2024
NAB is forecasting the cash rate will reach 3.60% by March 2023 and stay there for the remainder of the year, before dropping by 50 basis points to 3.10% by March 2024.
Mortgage Rate Forecast For 2023
The Federal Reserve hiked its benchmark interest rate seven times in 2022 by December. With inflation still above 7% as of November, the Fed recently signaled plans to continue raising the federal funds rate into 2023, though likely at smaller increases.
In a best-case scenario, we may see rates for 30-year mortgages somewhere between 5.5% to 6% by the end of 2023.”
The longer the fixed term, the higher the risk that average rates fall below yours and you pay more than you'd otherwise have to, you also lose some flexibility. Based on the current economic predictions for 2023/24 a 2 year fixed rate could be a good idea if you are able to lock in a good rate before the end of 2022.
Pros: Long term stability: with a 5 year fixed rate deal, you'll have a longer period of financial stability. This is especially useful in times of economic uncertainty, when interest rates are fluctuating a lot. Longer term fixed rate deals are also available (up to 40 years with the Habito One mortgage).
It depends on how much certainty you want! If you want to know exactly how much your monthly repayments are going to be for 10 years, then this might be the best option for you. However, we'd only recommend fixing your mortgage for 10 years if you know you're going to be staying in your property for at least this long.
Interest Rates for 2021 to 2027. CBO projects that the interest rates on 3-month Treasury bills and 10-year Treasury notes will average 2.8 percent and 3.6 percent, respectively, during the 2021–2027 period. The federal funds rate is projected to average 3.1 percent.
Fixed interest rates are higher now: some experts have said that the best time to fix your rate has passed, with fixed rates now much higher than they were a year ago. Rates are particularly high for investment loans.