March mortgage rate forecast
Mortgage rates are expected to go down sometime in 2024, but the decline probably won't start in March. Instead, mortgage rates are likely to remain about the same because the economy hasn't cooled off enough yet to cause them to fall.
When the economy grows robustly, and plenty of jobs are created, prices tend to go up. And when those three factors coexist, they combine to push interest rates higher. That's what happened in February, and it's unlikely that we'll see a reversal of those trends in March.
A strong February leads into March
Rates went up in February, with the average rate on the 30-year mortgage at 6.78% in Freddie Mac's weekly survey, up from 6.64% in January.
The culprit was a collection of strong economic data, released in February, that showed that the economy was running hot in late 2023 and into January. The overall economy grew at a 3.2% annual rate in the final three months of 2023. In January, the economy created a net 353,000 jobs and the core consumer price index accelerated. These signs of stronger-than-expected economic growth caused mortgage rates to rise in February.
Mortgage rates are unlikely to fall until there are unmistakable signs, for a few months in a row, that the economy is slowing down. We almost certainly won't see those signs in March, despite two years' toil by the Federal Reserve.
Eyes on the Fed
In an effort to slow the economy and get inflation under control, the Federal Reserve raised the overnight federal funds rate by 5.25 percentage points from March 2022 to July 2023. Inflation declined, as intended. The core CPI fell from 6.6% in September 2022 to 3.9% in January.
But inflation hasn't fallen enough. The Fed's goal is to reduce inflation to a 2% annual rate. The central bank will keep a floor under interest rates until inflation is unambiguously on the way to that 2% target. The Fed isn't eager to cut the federal funds rate anytime soon.
This commitment was underscored by the title of a speech given Feb. 22 by Fed governor Christopher J. Waller: "What's the Rush?"
Waller, who is a member of the Fed's rate-setting Open Market Committee, said in his speech that the central bank must wait to verify that inflation is genuinely cooling off, "and this means there is no rush to begin cutting interest rates to normalize monetary policy."
Usually Fed policymakers speak enigmatically, but sometimes they make themselves perfectly clear. That's what Waller did with that speech. He sent an unmistakable signal that the Fed wouldn't cut the federal funds rate at its March 20 meeting. With a rate cut off the table, there's not much room for mortgage rates to fall in March.
Waller did say that he expects the Fed to cut short-term rates this year, but added, "the risk of waiting a little longer to ease policy is lower than the risk of acting too soon and possibly halting or reversing the progress we've made on inflation." Therefore, there's no rush.
Other mortgage rate forecasts
Fannie Mae, the Mortgage Bankers Association and National Association of Realtors predict that mortgage rates will gradually descend in 2024, to around 6% in the final three months of the year.
However, if the Fed keeps the federal funds rate unchanged through the first half of the year, don't be surprised if forecasts are revised upward.
Looking back at February's prediction
At the beginning of the month, I predicted that "mortgage rates might not change much in February." Contrary to the prediction, mortgage rates did change in February: They started to rise in the first week and kept going up most of the month.
But the forecast served a purpose if it persuaded anyone to avoid waiting in vain for mortgage rates to fall in February.
I explained that rates "might remain relatively unchanged until markets believe the Fed is about to loosen monetary policy by cutting the federal funds rate." That didn't happen in February and it's not going to happen in March.
FAQs
Mortgage rate predictions 2024
NAR believes rates will average 7.1% this quarter and fall to 6.5% by the end of 2024. While there's some dispute on exactly how much rates will decrease, the general consensus is that mortgage rates will go down later in 2024 and end up in the mid-to-low 6% range.
Will mortgage rates ever be 3% again? ›
After all, higher rates equate to higher minimum payments. So, you may be wondering if, and when, mortgage rates might fall to 3% or lower again - and whether or not it's worth waiting to buy a home until they do. Although rates could fall to 3% again one day, it's not likely to happen any time soon.
What are the mortgage interest rate predictions? ›
The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025. Here's where mortgage interest rates are headed for the rest of the year and how that will impact the housing market as a whole.
Should I lock my mortgage rate today? ›
Once you find a rate that is an ideal fit for your budget, lock in the rate as soon as possible. There is no way to predict with certainty whether a rate will go up or down in the weeks or even months it sometimes takes to close your loan.
What will mortgage rates be in spring 2024? ›
We now forecast the 30-year fixed rate mortgage rate to average 6.6% in 2024, and to average 6.1% in 2025.”
What is the prediction for mortgage rates in 2024? ›
Mortgage rate predictions for 2024
The Mortgage Bankers Association and National Association of Realtors sit at the low end of the group, predicting the average 30-year fixed interest rate to settle at 6.68% for Q2. Meanwhile, the National Association of Realtors had the highest forecast of 7.10%.
How low will mortgage rates drop in 2025? ›
Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
How much does a 1 percent interest rate affect a mortgage? ›
Buying power boost: If you budgeted $4,896 a month for a mortgage payment, and the interest rate dropped 1 percentage point — from 7% to 6% — you could spend about $80,772 more on a home without increasing your monthly payment.
Are mortgage rates expected to drop again? ›
The general consensus among industry professionals is that mortgage rates will slowly decline in the last quarter of 2024. The projected declines have shrunk, though, in recent months. At the start of the year, for instance, Fannie Mae predicted rates would drop to 5.8%.
What will home mortgage rates be in 2025? ›
One reason being that as the Federal Reserve begins to cut rates, the bond market is expected to become less volatile, leading to a slight decline in mortgage rates. The average 30-year fixed mortgage rate as of Friday is 6.91%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%.
The predictions made by the various analysts and banks provide insight into what the financial markets anticipate for interest rates over the next few years. Based on recent data, Trading Economics predicts that rates will fall back down to 4.25% in 2024 and 3.25% in 2025.
What is the interest rate today? ›
Current mortgage and refinance interest rates
| Product | Interest Rate | APR |
|---|
| 30-Year Fixed Rate | 7.06% | 7.11% |
| 20-Year Fixed Rate | 6.80% | 6.85% |
| 15-Year Fixed Rate | 6.51% | 6.59% |
| 10-Year Fixed Rate | 6.40% | 6.48% |
5 more rowsIf interest rates go up after you've locked in your rate, you get to keep the lower rate. On the other hand, if you lock your rate and interest rates fall, you can't take advantage of the lower rate unless your rate lock includes a float-down option.
What day of the week are mortgage rates lowest? ›
In general, 25 basis points equates to a 0.125 percentage point change in mortgage rates. This data shows that rates tend to be most stable on Mondays, making it a good day for risk-averse borrowers to lock in a rate.
Can I change my lender after locking rate? ›
A rate lock doesn't lock you into the deal — if you find better terms and lower closing costs from another lender, you can opt to go with that lender after your rate lock with the first lender begins.
Will bank interest rates go down in 2024? ›
How low will interest rates drop in 2024? It's difficult to predict how interest rates will change but, in December 2023, the Fed predicted it would lower the federal funds rate to 4.6% by the end of 2024. That's the rate banks charge each other to borrow money, so it directly impacts the rate consumers pay.
Will interest rates still be high in 2024? ›
As a result, we expect mortgage rates to remain elevated through most of 2024. These high interest rates will prompt prospective buyers to readjust their housing expectations, but we anticipate housing demand to remain high due to favorable demographics, particularly in the starter home segment.
How low will mortgage rates go in 2025? ›
Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
Will savings interest rates go down in 2024? ›
According to the Summary of Economic Projections, the Fed may implement up to three 25-basis point interest rate cuts in 2024—bringing the federal funds rate closer to 4.60%. If this happens, it won't be surprising to see banks following suit and decreasing their savings account rates.
