Experts predict Lower Mortgage Rates 2024

lower mortgage rates for 2024

Experts are predicting lower mortgage rates for 2004:

National Association of Realtors chief economist Lawrence Yun. “Mortgage rates look to head towards 7% in a few months and into the 6% range by the spring of 2024.”According to Yun, he believes that the peak in interest rates has already been reached. The question now is when rates will come down. Yun forecasts that interest rates will drop to between 6-7% by the spring buying season and anticipates that more sellers will enter the market.

Danielle Hall Senior Economist at Realtor.com: There has been a shift in mortgage rates from climbing to falling; she expects mortgage rates to move lower in 2024. This change is due to the cooling of the economy, which has caused investors to shift into bonds. As a result, interest rates on 10-year Treasury notes have declined from nearly 5% in October to 4.1%. Mortgage rates have followed this declining trend as well.

Mortgage Bankers Association (MBA). MBA’s baseline forecast is for mortgage rates to decline and end 2024 at 6.1% level and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.

Bank of America head of retail lending Matt Vernon. “The Fed’s likely decision to cut rates in 2024 would be a key factor that could breathe new life into the housing market. However, it’s important to note that significant drops in mortgage rates might not happen in the early months of 2024. If any reductions occur, they are likely to be gradual, possibly beginning in the latter part of the year.”

Palisades Group chief investment officer and co-founder Jack Macdowell. “Our best guess is that mortgage rates will remain in the 7% to 7.25% range throughout Q1 2024.”

Fannie Mae Housing Forecast. The 30-year fixed rate mortgage will average 7% in Q1 2024 and slowly decline over the year, landing at a Q4 average of 6.5%.

The Fed Dot Chart sends Strong Signal. Mortgage Rates move lower.

When you read about the housing market, you’ll probably come across some information about inflation or recent decisions made by the Federal Reserve (the Fed). But how do those two things impact you and your homebuying plans? Here’s what you need to know.

The Federal Funds Rate Hikes Have Stalled are lower mortgage rates to follow?

One of the Fed’s primary goals is to lower inflation. In order to do that, they started raising the Federal Funds Rate to slow down the economy. Even though this doesn’t directly dictate what happens with mortgage rates, it does have an impact.

Recently, inflation has started to cool from 6.41 percent in January 2023 to 3.14% in November 2023, a signal those increases worked and are bringing inflation back down to the Fed’s 2% target. As a result, the Fed’s hikes have gotten smaller and less frequent. In fact, there haven’t been any increases since July (see graph below):

decline in mortgage rates

 

Graph predicts lower mortgage rates

And not only has the Fed decided not to raise the Federal Funds Rate the last three times the committee met, they’ve signaled there may actually be rate cuts coming in 2024. According to the New York Times (NYT):

“Federal Reserve officials left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.”

This indicates the Fed thinks the economy and inflation are improving. Why does that matter to you and your plans to buy a home? It could end up leading to lower mortgage rates and improved affordability.

Lower Mortgage Rates Are Coming

There are many factors that affect mortgage rates, but two of the most important ones are inflation and the actions (or lack thereof) of the Federal Reserve. Recently, the Fed stopped increasing rates, and this has led to a belief that mortgage rates will continue to drop, as shown in the graph below:

 

 

decline in mortgage rates

Although mortgage rates may remain volatile, their recent trend, combined with expert forecasts, indicates that mortgage rates could continue to go down in 2024. That would improve affordability for buyers and make it easier for sellers to move since they won’t feel as locked-in to their current, low mortgage rate.

Bottom Line

The Fed’s decisions have an indirect impact on mortgage rates. By not raising the Federal Funds Rate, mortgage rates are likely to continue declining. Let’s connect so you have expert advice about changes in the housing market and how they affect you.


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