Will mortgage interest rates drop after the Fed's March meeting? Here's what experts predict

Thanks to consistently high inflation, the Federal Reserve has been forced to keep interest rates paused at a 23-year high for some time. That's meant good things for savers, but for hopeful homebuyers, it's drastically increased the cost of taking out a mortgage due to higher mortgage rates.

Fortunately, economic conditions change constantly, and with several more Fed meetings on the agenda for this year, the central bank has many chances to cut rates in the coming months. Should that happen, it would likely lead to lower mortgage rates as well. 

Can we expect this as soon as the Fed's next meeting, though, or are lower mortgage rates further down the road? Here's what experts think.

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Will mortgage interest rates drop after the Fed's March meeting? Here's what some experts predict

The majority of experts don't expect the Federal Reserve's Open Market Committee to cut rates at its March 19-20 meeting, so what does that mean for mortgage rates? Those are unlikely to fall, too. 

Not only has inflation shown little movement since the bank's last meeting, but Federal Reserve Chairman Jerome Powell said there's little chance of a rate cut himself. 

"The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%," Powell said following the bank's last meeting. He also reiterated this at a House Committee on Financial Services appearance in early March.

"It currently appears that most FOMC members remain more concerned with the risk of inflation reigniting rather than the risk of tightening for too long, and financial history strongly suggests they are correct in taking this position," says Mark Higgins, a certified financial planner and senior vice president at Index Fund Advisors in Portland, Ore. "Inflation has now remained elevated for nearly three years, and there is much greater risk that it could become entrenched in the economy if the Fed fails to decisively extinguish it."

According to the CME Group's FedWatch Tool, there's about a 95% chance the Fed keeps rates as-is at its March meaning. This could mean mortgage rates will remain status quo (they're currently just below 7% on average), though what Fed members say about future rate moves will factor in as well.

"The mortgage market response to the March 20 meeting will depend not on what the Fed does, but on what it says," says Scott Clemons, chief investment strategist at investment and banking firm Brown Brothers Harriman in New York. "If the Fed acknowledges lingering inflationary pressures while also recognizing the continued health of economic activity, mortgage rates are likely to edge higher."

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Mortgage rates may not drop in March — but they could later in 2024

Though experts don't see a drop in mortgage rates right now, most foresee one later on in the year. 

"There will be little short-term movement on mortgage rates," says Rick Mount, managing partner of Churchill Mortgage's southwest region. "However, long-term — in the third and fourth quarters of 2024 and beyond — could see lower rates assuming inflation is tempered and approaching the 2% range that the Fed seems to be married to."

The CME Group tool currently has the likelihood of a rate cut highest in June. Still, that doesn't mean mortgage rates will plummet as a result. 

"While a one- to two-percentage-point decrease from their peak could be reasonable, I wouldn't expect a fall back toward the 3% 30-year fixed rate mortgage any time soon," says Jonathan Ernest, assistant professor of economics at Case Western Reserve University.

Currently, Fannie Mae projects the average rate on 30-year loans will end 2024 at 5.9%. The Mortgage Bankers Association (MBA) predicts a 6.1% rate at year's end.

What to do if you want to buy a home

While waiting to buy a home could mean a lower interest rate, there's no guarantee that rate drop will happen. If you have the budget to buy a home now, another option is to purchase today, but refinance later once rates drop further. The MBA projects a 5.5% rate by the end of 2025.

You can also make a larger down payment to reduce the balance you'll pay interest on or consider a mortgage buydown (also called mortgage points). With these, you can either pay upfront for a lower interest rate or have another party do it — a seller, lender or home builder, for instance. If this is something you're interested in, talk to your real estate agent and shop around for your vendors, as these offerings can vary quite a bit from one company to the next.