How to Predict Interest Rates 2023
What Pennsylvania property owners need to understand about rate movements, the Fed, and the open market.
The Fed's Target Rate: The Starting Point
No single factor moves mortgage rates more than Federal Reserve policy. The Fed's Federal Open Market Committee (FOMC) meets eight times per year and sets a target range for the federal funds rate. This is the rate banks charge each other for overnight borrowing — and it ripples through every credit market in the U.S., including mortgages.
In 2022 and early 2023, the Fed executed one of the fastest rate-hiking cycles in history — raising rates from near 0% to over 5% in response to the highest inflation in 40 years. Mortgage rates roughly doubled during this period, going from sub-3% to over 7%. For Pennsylvania home sellers and buyers, this was one of the most significant shifts in recent memory.
The Open Market: What Actually Moves Rates Day to Day
While the Fed sets a direction, daily mortgage rates are determined by the open market — specifically, demand for mortgage-backed securities. These are the key economic indicators that mortgage professionals watch:
Federal Funds Rate (The Fed's Target Rate)
The Federal Reserve sets a target range for the federal funds rate — the rate banks charge each other for overnight lending. When the Fed raises this rate, borrowing costs increase across the economy, including mortgage rates. When they cut it, rates tend to fall. Watching Fed meeting announcements (FOMC) is the most direct indicator of rate direction.
10-Year Treasury Yield
Mortgage rates are closely correlated with the 10-year U.S. Treasury yield — not the Fed funds rate directly. When investors sell Treasuries (yields rise), mortgage rates tend to follow. When demand for Treasuries rises (yields fall), mortgage rates often decline. The 10-year yield is publicly available and watched daily by mortgage professionals.
Inflation Data (CPI and PCE)
The Fed's primary mandate is to maintain price stability (2% inflation target). When the Consumer Price Index (CPI) or Personal Consumption Expenditures (PCE) run hot, the Fed is more likely to raise rates or hold them higher for longer. Declining inflation numbers often precede rate cuts.
Employment Data (Jobs Report)
Strong employment means a strong economy — which can sustain higher rates. When unemployment rises significantly, the Fed becomes more likely to cut rates to stimulate growth. The monthly Bureau of Labor Statistics jobs report is a major market mover.
Mortgage-Backed Securities (MBS) Market
Mortgage rates are also directly influenced by demand for mortgage-backed securities. When MBS investors demand higher yields, lenders pass those costs to borrowers. The MBS market is part of the open market the Fed can influence through bond purchases (quantitative easing) or sales (quantitative tightening).
What Rate Changes Mean for Pennsylvania Sellers
High rates reduce buyer purchasing power
At 7% interest, a buyer qualifies for roughly 30% less mortgage than at 4%. This directly reduces the number of qualified buyers for your property and can suppress offer prices.
Cash buyers are less rate-sensitive
Investors and companies like House Buying Solutions buy with cash — eliminating interest rate exposure entirely. In a high-rate environment, cash offers become more valuable relative to financed offers.
Rate locks matter in fluctuating markets
If you're accepting a financed offer, consider the buyer's rate lock. A 30-day rate lock may expire before closing if the transaction is delayed, potentially affecting the buyer's ability to close.
Can You Actually Predict Rates?
Short answer: no — not precisely. Even professional economists routinely get rate predictions wrong. The Fed's own dot plot (rate projections from FOMC members) has frequently diverged from actual outcomes. What you can do is:
- Track Fed meeting dates and announcements at federalreserve.gov
- Monitor the 10-year Treasury yield daily (available at treasury.gov or financial sites)
- Follow monthly CPI and jobs reports (Bureau of Labor Statistics — bls.gov)
- Read forward guidance in Fed Chair press conferences for signals about future moves
- Work with a local PA mortgage professional who monitors these markets daily
The Bottom Line for NEPA Property Owners
Interest rates affect how much buyers can pay for your property. In a high-rate environment, the pool of qualified buyers shrinks and offer prices moderate. If you need to sell in 2023 or are considering your options, understanding where rates stand — and where they might be headed — is useful context for timing and pricing decisions.
Stay Connected With the Local Market
House Buying Solutions monitors the Northeast Pennsylvania real estate market continuously. If you want to understand how current rate conditions affect your property's value or selling timeline, we're happy to have that conversation — no obligation.