Will mortgage rates drop below 6% in 2024? Here's what some experts think
The US economy is in a tricky spot. To close out 2023, fourth quarter GDP measured at a robust 3.3% annual growth rate, but inflation remains above the Fed's desired 2% target, so the central bank has yet to cut interest rates. Still, many expect that rate cuts will come this year as the economy and inflation cool down more. For the mortgage market, that could also mean that rates come down.
Already, 30-year mortgage rates have fallen from recent highs. While they reached approximately 8% in October 2023, they now average 6.63% as of the beginning of February 2024, according to Freddie Mac.
But what will happen the rest of the year? Below, we'll look at three possible mortgage rate scenarios.
If you're in the market to buy a home then start by exploring your mortgage rate options here now.
Will mortgage rates drop below 6% in 2024?
Here are three possible scenarios for mortgage rates this year, according to the experts we spoke to.
Mortgage rates will drop below 6%
Mortgage rates could continue to trend downward this year, especially once the Fed starts cutting the federal funds rate.
"Mortgage rates will go down in 2024. How much and when depends on the economy and inflation. I believe that we will see rates trending to 6% in the summer, perhaps not until late summer," says Melissa Cohn, regional VP at William Raveis Mortgage. After that, "I believe that rates will drop below 6% and stay below 6% for the year."
Some experts predict an even larger drop, though still not at pandemic-era levels.
"I believe they will fall to 4.25%," says Dan Green, CEO at Homebuyer.com. "Inflation is solved, lenders are competitive, and the bond market is finding its health."
See how low of a mortgage rate you could get now.
Mortgage rates will drop somewhat but not below 6%
While some people think that mortgage rates will fall further, not everyone is convinced that they'll drop significantly from their current levels. As mentioned, GDP remains strong, and lower rates tend to coincide with a weakening economy, which might not occur.
Shannon Feick, co-owner and co-founder at ASAP Properties, LLC, says he's "confident that the relatively strong economy will likely prevent rates from falling below 6% in 2024, but with inflation cooling, mortgage rates will fall slightly from their current levels."
Still, it's possible that the economy's health and inflation rate get thrown off by unexpected events, like how geopolitical conflicts have caused oil price swings, which can ultimately influence interest rate decisions.
"I do believe that curveballs like geopolitical events or significant shifts in the job market could alter this forecast, but only by a small amount," says Feick.
Mortgage rates will stay the same
Another scenario could be that rates end up staying essentially the same, with mid-6% interest rates persisting.
"I think rates will stay flat on average this year, meaning that they will stay in the mid-6s, which is where we dropped to at the end of the year, going into 2024," says Sam Sharp, executive VP of mortgage lending at Guaranteed Rate.
It's also possible that rates go higher, but Sharp thinks that the current levels seem to be working.
"I believe that the markets have tested their threshold. When rates capped over 8% the housing market saw a steep decline. As soon as rates dropped into the mid-6s we saw a quick change, and this looks to be a sweet spot in the current environment," he says.
"Not only is this a level that buyers seem more comfortable with, but I feel this is a good baseline for some sellers, and their motivation is what we need to create a balanced housing market," explains Sharp.
Learn more about today's mortgage rates online here.
The bottom line
It's hard to predict exactly where mortgage interest rates will go in 2024, as much depends on factors like the state of the economy and how the Fed responds to inflation. But if you can afford to buy a home now at current levels, you might be better off doing so for two main reasons.
One, it's hard to say how long you'll have to wait for rates to drop — if they do at all — and you might not want to put your home search on hold indefinitely. Two, a decrease in mortgage rates could increase competition among homebuyers, as those who have been waiting for rates to drop might jump in, thus complicating the process.
However, one advantage of waiting to buy a home could be that more sellers jump in, too. Some sellers have been reluctant to give up their homes and then buy a new one at high mortgage rates. But if rates do drop, or if sellers simply get more accustomed to current rates as the new normal, then that could increase inventory.
So, you'll have to weigh these factors, along with looking at your finances and the local conditions in your desired area to see what makes the most sense for you. And while you probably don't want to bank on it, mortgage refinancing could be an option down the road if rates drop further.
