Will mortgage rates drop below 6% this fall? Experts weigh in

Over the last three years, average mortgage rates have almost doubled. On August 19, 2021, the average 30-year fixed rate was 2.86%. By comparison, today's average 30-year mortgage rate is 6.57%. This uptick in rates has made purchasing a home less affordable for many buyers.  In addition, home prices have hit record highs this year, putting the possibility of homeownership out of range for many.

That said, on a positive note, mortgage rates have fallen more than half a percentage point in recent months (average 30-year rates were 7.22% on May 2, 2024). In addition, experts still expect the Federal Reserve to cut rates in September. And if that happens, rates might drop even lower. 

A drop down to the 6% mortgage rate mark could mean a cheaper mortgage for potential buyers. But is it realistic to expect mortgage rates to drop that low this fall? We asked some experts for their thoughts.

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Will mortgage rates drop below 6% this fall?

Here's where mortgage rates could end up this fall, according to the experts we consulted:

Mortgage rates could drop below 6%

Some experts think mortgage rates could drop below 6% this fall depending on certain factors.

"The primary factors influencing mortgage rates for the rest of the year will be the upcoming inflation data for July, to be reported on August 30 via the PCE Index, and the jobs report on September 6," says Jason Obradovich, a chief investment officer at mortgage lender New American Funding. 

In turn, Obradovich says the Fed's decision on September 18th will likely hinge on these two data points. "If inflation continues to decrease and unemployment continues to rise, mortgage rates could see a significant reduction, potentially dipping into the 5% range this fall," he says.

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Mortgage rates could fall but not below 6%

Other experts expect that mortgage rates will drop if the Fed cuts rates. However, they don't think they'll fall below 6% this year.

"If the Fed takes action to cut rates in September, the impact on rates is likely to be positive but also largely muted as the market already expects a rate reduction by the Fed," says Rob Cook, vice president of Discover Home Loans. As a result, he says most forecasts expect mortgage rates to remain above 6% into late 2025.

"Two forecasts worth keeping an eye on are from the Mortgage Bankers Association and Fannie Mae," says Cook. "While these forecasts haven't been updated for a few weeks, most recently both predicted rates above 6% into late 2025."

Jeff Tucker, principal economist at Windermere Real Estate, agrees with Cook that rates likely won't drop below 6% this fall.

"I think it is likely the Federal Reserve will begin to lower the Federal Funds Rate at their September meeting, but I do not think that will push 30-year mortgage rates below 6%," says Tucker. "The main reason is that a cut in September is now widely expected, so much of its impact has already been priced in by investors."

Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage, says rates could drop but isn't sure whether they'll dip below 6% this fall. However, she does say, "we expect to see average 30-year fixed rates moving toward the 5s over the course of 2025."

That said, Alvarez says, "Don't spend too much time trying to game the market- you will always have the opportunity to refinance down the road, but the right house will not always be there!"

Mortgage rates could climb higher

Although mortgage rates are expected to drop, nothing is guaranteed. If something unexpected happens in the economy, rates could climb higher, according to Obradovich.

"If inflation rises unexpectedly, mortgage rates could climb regardless of the employment data," says Obradovich. "However, the jobs report remains crucial; stable inflation combined with rising unemployment could lead to lower mortgage rates."

Is now a good time to buy a home?

With rates expected to fall later this year and into 2025, you may wonder whether you should buy now or wait. 

To answer this question, you have to weigh the pros and cons. For example, a pro is that locking in a fixed rate means your rate won't change over the life of the loan even if rates climb higher. On the flip side, waiting could mean that you secure a lower rate and lower monthly payment.

However, nothing is guaranteed. That's why some experts advise against waiting for mortgage rates to fall if you're ready to purchase a home now.

"Keep in mind that once rates come down there are many people who will be coming back into the market – more competition can drive up prices so make sure you do the math," says Alvarez. "Spending a little more on a mortgage now could make the difference in terms of being able to afford the home you want."

The bottom line

Because so many factors influence mortgage rates, it's impossible to predict with absolute certainty whether they'll drop below 6% this fall. As a result, if you can afford to buy a home now, doing so could make sense in some scenarios. For instance, locking in a fixed rate protects you against future mortgage rate increases. And, experts say, you may pay less for a home now versus waiting if rates drop and many buyers come off the sidelines, potentially driving up home prices.

However, if you decide to wait for mortgage rates to fall some more before you buy a home, Obradovich recommends paying attention to economic data. 

"For buyers, it's advisable to closely monitor the forthcoming inflation and jobs data, as these will provide early insights into the Fed's likely actions in September," says Obradovich. "Any unexpected shifts in inflation or unemployment could significantly impact mortgage rates and influence home sales."