How low will mortgage rates drop in 2024?
30-year mortgage rates are currently expected to fall to somewhere between 5.9% and 6.1% in 2024. Instead of waiting for rates to drop, homebuyers should consider buying now and refinancing later to avoid increased competition next year.
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.
Many experts predict interest rates will remain at their current level for most of 2024. This may mean that mortgage rates stay at or about the same level as now for many months before possibly starting to fall towards the end of 2024.
In summary, it is unlikely that mortgage rates in the US will ever reach 3% again, at least not in the foreseeable future. This is due to a combination of factors, including: Higher Inflation: Inflation is currently at a 40-year high in the US, and the Federal Reserve is raising interest rates to combat it.
If all goes well, by the time 2025 comes around, we could see mortgage rates closer to 6%, or maybe even lower.
Goldman said it expects 30-year mortgage rates will drop to 6.3% by the end of 2024, and fall slightly in 2025 to 6% as the Fed starts to cut interest rates. Previously, Goldman had expected the 30-year mortgage rate to be at 7.1% by the end of 2024 and at 6.6% by the end of 2025.
Mortgage rates are likely to go down in 2024. Rates have already been declining since the start of August - they are currently at 5.95% for an average 2 year fixed and 5.57% for an average 5 year fix, down from 6.85% and 6.37% respectively. This has been helped by inflation coming down over the last few months to 4.0%.
The latest Monetary Policy report says rates are expected to remain around 5.25% until autumn 2024 and then decline gradually to 4.25% by the end of 2026. The future of interest rates depends significantly on how quickly inflation drops – while wage growth and unemployment also play a factor.
Projected Interest Rates in the Next Five Years
ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter. Then, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.
"We would expect mortgage rates to be closer to 6.5% in 2025 than the current rate of 8%." Other projections align with that rate expectation.
Will mortgage rates go down to 5 percent again?
The 30-year fixed mortgage rate is expected to fall to the low-6% range through the end of 2024, dipping into high-5% territory by early 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.
Overall, forecasters expect mortgage rates to continue easing. The Mortgage Bankers Association projects rates to fall to 6.1 percent by year's end, while Fannie Mae forecasts they'll be at 5.8 percent. The National Association of Realtors estimates rates will average 6.3 percent for the full year.
If inflation continues to fall as it did throughout 2023, industry insiders are optimistic that average mortgage rates could fall below 5% again in 2024.
The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.
In 2025, the housing market is expected to start picking up again, with home prices rising by approximately 1% to 2% above the current inflation rate.
Following the Fed "pivot" in December, an anticipation of more dovish policy, and the recent decline in interest rates, our mortgage rate forecast has been revised meaningfully lower this month. We expect the FRM30 rate to average 6.1 percent in 2024 and 5.6 percent in 2025.
Changes to Interest Rate Projections
In the December report, CBO estimates that the federal funds rate will average 5.3 percent in the fourth quarter of 2023 before falling to 3.7 percent by the end of 2025.
Predicted Range for 2025
Considering these factors, a conservative prediction for 30-year fixed mortgage rates by 2025 could be in the range of 5.5% to 7%.
Legally speaking, there's no limit to how many times you can refinance your mortgage, so you can refinance as often as it makes financial sense for you. Depending on your lender and the type of loan, though, you might encounter a waiting period — also called a seasoning requirement.
“The housing market is off to a good start this year, as consumers benefit from falling mortgage rates,” said NAR chief economist Lawrence Yun in the association's December pending home sales report. NAR forecasts that sales will rise by 13 percent in 2024.
Is it better to buy a house when interest rates are high?
Even with interest rates as high as they are, it's still a great time to buy a house. The higher interest rates have priced some buyers out of the market, which means you could face less competition when you make offers.
A key rule, put forward by Martin Lewis's MoneySavingExpert, is that if your mortgage rate is close to, or higher than, a savings rate, then it is a good idea to overpay.
Mortgage Bankers Association (MBA).
MBA's baseline forecast is for mortgage rates to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.
According to the Fed's most recent economic projections from December, economists don't see inflation subsiding to 2.0% on a consistent basis until 2026, which could mean higher but declining short-term interest rates for the next two years.
But we expect the first federal-funds rate cut to come in May or June 2024, bringing the rate down to 4.00% to 4.25% at the end of 2024. We expect the Fed to continue cutting through the end of 2025, ultimately bringing the federal-funds rate down by over 300 basis points.
