Will mortgage rates fall to 6% in 2024?
Over the last two years, the Fed implemented a series of rate hikes that caused mortgage rates to spike further than they have in over 20 years. The average 30-year fixed mortgage rate in the U.S. climbed from a record-low of under 3% up to a 23-year high of 7.57%. Now that inflation has cooled, further Fed rate increases have ceased and today's mortgage rates are holding around 7%. But when will they come back down?
If you're waiting for mortgage rates to drop to buy, sell, or refinance a home, it helps to know what experts predict for 2024.
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Will mortgage rates fall to 6% (or lower) in 2024?
Many experts agree that the rates are headed into the 6% range in the coming year.
"Regarding the volatile future of mortgage rates, there are several indicators that suggest a fall to 6% in 2024 is the most realistic prediction," says Dave Forehand, the owner of Team Forehand Realty. "This projection is based on current trends in inflation as well as the Federal Reserve's decision to hold current rates."
According to the Federal Reserve's November and December press releases, inflation has eased over the past year but remains above the 2% target rate. While the Board of Governors has been using rate increases to bring the inflation rate down, it's voted to maintain the federal funds rate at 5.25% to 5.50% for the past five months.
Aaron Gordon, a senior mortgage loan officer at Guild Mortgage, says mortgage rates will likely come down in 2024 but he doesn't expect it to happen right away due to the elevated inflation rate.
"In the first half of 2024, inflation will remain somewhat stubborn, the jobs reports will continue to send mixed messages, and the Fed will try and temper down over-exuberant investors and consumers who believe Fed rate hikes are over and Fed rate cuts are imminent," says Gordon, "Rates will stay in the 6.625% to 7.25% range."
As for the second half, Gordon predicts, "Inflation will be curbed, the economy will cool, and unemployment will continue to rise. The Fed will no longer be able to send mixed messages and will have to admit their plan worked. They'll start to lower their rates early this summer to try and maintain balance and avoid a recession."
He adds, "I predict mortgage rates will then go down to the low to mid-sixes."
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What factors will impact mortgage rates in 2024 and beyond?
The Federal Reserve says its assessments are based on labor market conditions, financial and international developments, and inflation pressures and expectations — factors that, experts say, are also key to determining mortgage rates.
"If you want to know what's next in mortgage rates, simply read the financial news every day. As a general rule of thumb, good economic news makes rates go up, and bad economic news makes them go down. Not fool-proof but pretty darn close," says Gordon.
Dan Green, CEO at Homebuyer.com also suggests that discount points on mortgages can offer a clue.
"If you want to play smart and figure out when mortgage rates might dip, keep an eye on discount points. Those points can be your early heads-up for next year's rates. Once lenders start cutting down on the points they charge buyers, that's your sign that rates are on the way down," says Green.
As for making predictions longer-term, there are many factors to consider.
"Predicting rates for 2025 involves greater uncertainty, especially with presidential elections approaching. We'll need to closely monitor things like inflation trends, economic recovery post-pandemic, and policy decisions by financial authorities. We also need to consider things like geopolitical events because they also play an important role in shaping mortgage rates," says Forehand.
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