Will house interest rates go down in 2024?
Until inflation slows and the Fed is able to start lowering the federal funds rate, mortgage rates are expected to remain elevated. Most major forecasts believe that mortgage rates will ultimately trend down this year. Fannie Mae researchers recently predicted that rates would reach 6.4% by the end of 2024.
The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%.
Maybe not in 2024, one Fed official cautions. A Federal Reserve official on Thursday raised the possibility the central bank may not cut interest rates at all in 2024, deflating Wall Street's expectations that several reductions could be in store later this year.
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%.
Inflation is anticipated to keep falling in 2024 and may reach the BoE's 2% target earlier than expected. As inflation has declined faster than expected this year, the BoE could start cutting the base rate in 2024 and possibly fall to 4% by the end of next year, according to data from private bank Berenberg.
It's possible that rates will one day go back down to 3%, though if current trends hold that's not likely to happen anytime soon.
Mortgage rates are expected to decline later this year as the U.S. economy weakens, inflation slows and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the mid- to low-6% range through the end of 2024, potentially dipping into high-5% territory by early 2025.
| Source | Projected 30-year mortgage rate (by end of 2024) |
|---|---|
| Mortgage Bankers Association | 6.1% |
| Fannie Mae | 5.8% |
| Realtor.com | 6.5% |
| Redfin | 6.6% |
| Month | Average 30-Year Fixed Rate |
|---|---|
| January 2024 | 6.64% |
| February 2024 | 6.78% |
| March 2024 | 6.82% |
| April 2024 | 6.99% |
The nation's top economists say the Fed is most likely to keep interest rates higher than 2.5 percent — often considered the “goldilocks,” not-too-tight, not-too-loose level for its benchmark federal funds rate — until the end of 2026, Bankrate's quarterly economists' poll found.
Will the Fed cut rates in 2024?
The prospect of a no-cut scenario for 2024 is 31%, up from 20% a month ago, BNP Paribas data showed. Chances of the first 25-bp hike in 2025 are at 22%. Volume though is typically thin the further out the curve so that number can change.
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."
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.
Many prospective homebuyers chose to wait things out in 2023, in the hopes that 2024 would bring a more advantageous market. But so far, with mortgage interest rates still relatively high and housing inventory stubbornly low, it looks like 2024 will remain a challenging time to buy a house.
Until inflation slows and the Fed is able to start lowering the federal funds rate, mortgage rates are expected to remain elevated. Most major forecasts believe that mortgage rates will ultimately trend down this year. Fannie Mae researchers recently predicted that rates would reach 6.4% by the end of 2024.
When will interest rates fall? Most analysts think that interest rates have peaked and will soon start to fall, with current market expectations placing the first cut this summer. The Bank will lower the base interest rate to 3% by the end of 2025, according to analysis by research firm Capital Economics.
| Loan Type | Purchase | Refinance |
|---|---|---|
| FHA 30-Year Fixed | 7.51% | 7.69% |
| VA 30-Year Fixed | 7.12% | 7.67% |
| Jumbo 30-Year Fixed | 7.32% | 7.33% |
| 20-Year Fixed | 7.49% | 7.84% |
Doing so lowers the overall amount of interest they pay over the mortgage term. This practice is sometimes called “buying down the interest rate.” Each point the borrower buys costs 1 percent of the mortgage amount. One point on a $300,000 mortgage would cost $3,000.
When inflation is running high, the Fed raises those short-term rates to slow the economy and reduce pressure on prices. But higher interest rates make it more expensive for banks to borrow, so they raise their rates on consumer loans, including mortgages, to compensate.
Last month, the Federal Reserve left its key interest rate unchanged at a 23-year high of 5.25% to 5.5% and held to its forecast of three rate cuts in 2024.
What is the lowest mortgage rate ever?
The average 30-year fixed rate reached an all-time record low of 2.65% in January 2021 before surging to 7.79% in October 2023, according to Freddie Mac.
If you want the best deal on your mortgage, consider buying a home when prices are at their lowest: late fall and early winter. Home prices peak just about every year in the summertime. Yes, shopping for a home in the summer months means you're likely to see plenty of available homes on the market.
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.
Lower mortgage rates in 2024 — NAR is predicting the average will be 6.3% by the fourth quarter, down from 7.8% in 2023's final three months — will entice more owners to give up the super-low rates they got during the pandemic and put their homes on the market, Yun said.
Legally, there isn't a limit on how many times you can refinance your home loan. However, mortgage lenders do have a few mortgage refinance requirements you'll need to meet each time you apply for a loan, and some special considerations are important to note if you want a cash-out refinance.
