Mortgage rates are projected to decline next year — but that doesn’t mean prospective homebuyers should necessarily delay a purchase for the prospect of lower financing costs.

The rate on a 30-year fixed mortgage will fall to an average 4.5% in 2023, according to a recent housing forecast published by Fannie Mae, a government-sponsored lender.

That dynamic would offer relief to would-be homebuyers who’ve seen mortgage rates balloon this year.

The Federal Reserve started increasing its benchmark interest rate in March to tame stubbornly high inflation, which has resulted in higher borrowing costs for consumers — who may feel a sense of whiplash from 2020, when rates bottomed out near historically low levels.

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Average rates are expected to be 4.7% and 4.4% in the first and fourth quarters of 2023, respectively — down from 5.2% in Q2 this year, according to Fannie Mae.

Still, consumers should “take forecasts with a grain of salt,” according to Keith Gumbinger, vice president of HSH, a market research firm.

“If you’re participating in the marketplace, interest rates are important but might not be the most important component,” Gumbinger said.

Rates for a 30-year fixed mortgage — the interest rate of which doesn’t change over the loan’s term — have jumped more than two percentage points since the beginning of 2022.

Rates averaged 5.55% the week of June 23, according to data from Freddie Mac, another government-sponsored entity. That’s up significantly from 3.22% the first week of January though a slight decline from the 5.81% high point in June.

Even a seemingly small jump in mortgage costs can have a big impact on consumers, via higher monthly payments, more lifetime interest and a smaller overall loan.

Here’s an example, according to HSH data: At a 3.5% fixed rate, a homebuyer with a $300,000 mortgage would pay about $1,347 a month and $185,000 in total interest over 30 years. At a 5.5% rate, homeowners would pay $1,703 a month and pay over $313,000 in interest for the same loan amount.

Here’s another example, which assumes a buyer has an $80,000 pretax annual income and makes a $30,000 down payment. This buyer would qualify for a $295,000 mortgage if rates were 3.5%, about $50,000 more than the same buyer at a 5.5% rate, according to HSH data. That differential may put certain home out of reach.

Many consumers have turned to an adjustable-rate mortgage instead of fixed mortgages as borrowing costs have swelled.

Adjustable-rate loans accounted for more than 12% of mortgage applications in both June and July this year — the largest share since 2007 and double the percentage from January this year, according to Zillow data.

These loans are riskier than fixed rate mortgages. Consumers generally pay a fixed rate for five or seven years, after which it resets; consumers may then owe larger monthly payments depending on prevailing market conditions.

Kevin Mahoney, a certified financial planner based in Washington, D.C., favors fixed-rate loans due to the certainty they provide consumers. Homebuyers with a fixed mortgage can potentially refinance and lower their monthly payments when and if interest rates decline in the future.

More broadly, consumers should largely avoid using mortgage estimates like Fannie Mae’s as a guide for their buying decisions, he added. Personal circumstances and desires should be the primary driver for financial choices; further, such predictions can prove to be wildly inaccurate, he said.

“You could chase better numbers for years on end in some cases if things don’t go your way,” said Mahoney, founder and CEO of millennial-focused financial planning firm Illumint.

But prospective buyers can perhaps risk waiting if they don’t have a rigid timeline for a purchase and have cushion in their budgets in case mortgage rates don’t move as projected, Mahoney added.

Consumers who find a home they like — and can afford to buy it — are likely better served jumping on the opportunity now instead of delaying, Gumbinger said.

Even if borrowing costs improve next year, overall affordability will likely still be a challenge if home prices stay elevated, for example, he added.