Here's how far mortgage rates could drop before the end of 2024

The Federal Reserve's 50-basis-point rate cut from September 18 has started to push mortgage interest rates down, bringing a glimmer of hope to potential buyers. With two more Fed meetings scheduled before the end of 2024, we could see rates continue to fall.

Experts are weighing in on how low mortgage rates might go, and their predictions might surprise you. Some see rates dropping to the mid-5% range, while others are even more optimistic. But factors such as inflation and government debt could impact these forecasts.

If you're eyeing a home, the question becomes: Should you buy now or wait for lower rates? It's a tricky balance. Lower rates mean smaller monthly payments, but they also could spark a surge in home prices. Here's what mortgage specialists predicted in terms of potential rate drops for the rest of this year.

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Here's how far mortgage rates could drop before the end of 2024

Debbie Calixto, sales manager at loanDepot, offers a cautiously optimistic view of where mortgage rates could head before 2025. 

"While we'll likely see a modest improvement in mortgage rates following [the Fed's decision on the 18th], future movement will depend on economic data in the coming weeks," Calixto says. 

Calixto predicts the Fed might cut rates by another 50 to 75 basis points by year-end, potentially bringing mortgage rates down to the mid-5% range.

Josh Green, a mortgage loan officer at Barrett Financial Group, is bullish on rate cuts. 

"If we're talking about a conventional 30-year fixed with 25% down and a 740 credit score, I'd say we'll hit around 5.5% to 5.75% by the end of 2024," Green says. 

Green believes rates will continue to drop as we enter 2025, barring unexpected inflation spikes.

Looking further ahead, Dean Rathbun, a mortgage loan officer at United American Mortgage Corporation, paints an even brighter picture.

"We're looking at rates to possibly be in the high fours or low fives by 2025," Rathbun says. This could be a game-changer for new buyers and recent homebuyers looking to refinance.

Learn about the top mortgage loan rates you could qualify for here.

Pros and cons of waiting for another rate drop

Even with rate drops on the horizon, waiting might not be the best move for homebuyers.

"Traditionally when rates drop, sales activity picks up and therefore prices become higher," Rathbun says. He tells his clients it's often better to buy with a slightly higher interest rate today because refinancing is possible later.

But your decision ultimately depends on your circumstances. To determine what makes the most sense, it may help to weigh these pros and cons:

Pros of waiting

• Possibility of lower monthly payments if rates fall
• Potential for lower finance costs

Cons of waiting

• Risk of higher home prices due to increased demand
• More competition from other buyers entering the market
• Missing out on building equity sooner
• Potential refinancing costs if you buy now and refinance later

Should you buy a home now or later?

When deciding, Calixto advises focusing on what's best for you and your family rather than market conditions you can't control. It may help to ask yourself:

• Is your family growing?
• Are you looking to put down roots in a new community?
• Do you want to be closer to family?

These factors often outweigh slight differences in interest rates.

Her own experience illustrates this point. In 2016, Calixto bought a home for her family. 

"I found [the perfect] house for us, but it needed work," Calixto says. "Despite the higher monthly payment, I saw its potential and made an offer, knowing I'd have to make some sacrifices to afford it."

Over the next five years, she renovated the home and refinanced it to lower her interest rate and payments. Today, she has nearly $400,000 in home equity.

Calixto's story highlights an important consideration: Waiting for lower rates can work against you. 

"Had I waited, I wouldn't have been able to buy this home — the lower rates led to higher property values, which would have pushed it out of my price range," she explains.

The bottom line

Mortgage rates may drop further, but waiting could cost you in other ways. "Inventory is tight and there are plenty of buyers out there, even [at] current prices," Green says. If you continue to sit on the sidelines, "you can almost count on prices going up as a result."

So if you've been thinking about buying a home or refinancing, it could benefit you to work with a respected mortgage professional who can help you prepare, understand your options and determine whether you can afford and sustain a home purchase.