In recent years, mortgage rates have climbed tremendously. But is this trend set to continue? Or will prospective home buyers get much-needed relief in the form of lower rates to make homeownership more affordable?
Industry forecasts indicate a decline in mortgage rates but can be good news and music to your ears if you’re a prospective buyer or are looking to refinance soon. That said, the actual changes in rates will largely depend on the economic climate.
Why Rates Are Expected to Go Down in 2024
Economic indicators suggest a potential for mortgage rates to decline in 2024. The Federal Reserve plays a vital role in this expected change. If the Fed implements rate cuts, which are measured in basis points (100 basis points = 1%), it could lead to lower mortgage interest rates.
These cuts are often a response to the need to stimulate economic growth, especially if the economy shows signs of slowing down.
Keep in mind that the forecasting of mortgage rates does not imply a dramatic drop, as a gradual decline is what experts anticipate.
Mortgage Rate Projections 2024 (Q1, Q2, Q3 and Q4)
The National Association of Realtors projects a slight dip in mortgage rates this year. Both Fannie Mae and the Mortgage Bankers Association share the same sentiments. Here are their predictions by quarter for 30-year fixed-rate mortgages:
| Q1 | Q2 | Q3 | Q4 | |
| National Association of Realtors | 6.8% | 6.6% | 6.3% | 6.1% |
| Fannie Mae | 6.5% | 6.3% | 6.1% | 5.9% |
| Mortgage Bankers Association | 6.9% | 6.6% | 6.3% | 6.1% |
Mortgage Rates by Mortgage Lender
Your mortgage rate can significantly vary depending on the lender you choose. Each lender sets rates based on market conditions, its business model, and its relationship with government-controlled mortgage investors like Fannie Mae and Freddie Mac.
Here’s an example of how rates vary by lender:
| Lender | Advertised 30-year mortgage rates for a fixed-rate home loan |
| CrossCountry Mortgage | Not published |
| Mutual of Omaha Mortgage | Not published |
| Top Flite Financial | Not published |
| Veterans United Home Loans | 6.50% (6.925% APR) |
| New American Funding | 6.25% (6.564% APR) |
| Mr. Cooper | 6.75% (7.136% APR) |
| Rocket Mortgage | 7.125% (7.449% APR |
| Newrez | Not published |
| Guaranteed Rate Mortgage | 6.45% (6.804% APR) |
| AmeriSave | Not published |
| loanDepot | Not published |
What Affects Mortgage Rates?
Several factors play a role in how current mortgage rates are set.
Factors Influencing Mortgage Rates
Mortgage rates offered to borrowers can be significantly affected by the Federal Reserve’s monetary policy. When the central bank adjusts interest rates to manage economic growth and inflation, this trickles down to influence the mortgage rates lenders offer you.
Fannie Mae and Freddie Mac also play a vital role. These government-sponsored enterprises acquire mortgages from lenders and sell them as securities, impacting your rates depending on supply and demand.
The Role of the Federal Reserve
The Federal Reserve sets the tone for interest rates on most loan products. By raising or lowering the federal funds rate, the Fed aims to contain inflation or stimulate economic growth. Consequently, these changes often lead lenders to adjust their mortgage rates.
Economic Indicators and Their Influence
Various economic factors such as GDP growth, unemployment rates and consumer spending also impact your mortgage rates. When the economy is booming, rates tend to rise to keep inflation in check. On the other hand, in times of economic downturn, rates are lowered to spur borrowing and investment.
Real Estate Market Dynamics
The state of the housing market is another influencer of mortgage rates. High demand for homes can drive up rates, while adverse market conditions can lead to lower rates. Supply shortages or surpluses, construction costs and housing policies can all adversely impact advertised rates.
Understanding What Mortgage Rate Predictions Mean for You
Mortgage rate predictions influence your monthly payments and total borrowing costs over the life of the loan.
What Predictions Mean for Current Homeowners
If you have an adjustable-rate mortgage and rates are expected to rise, it might be a good time to consider refinancing to a fixed-rate mortgage. On the other hand, if rates decline, there may be an opportunity to save money by refinancing at a lower rate.
Implications for Future Homebuyers
For those considering entering the housing market, predictions of decreasing mortgage rates can signal a potential reduction in the long-term cost of purchasing a home. Conversely, if rates are likely to increase, securing a mortgage soon could be ideal to lock in current rates before they rise.
Mortgage rates can also impact home prices as they affect buyers’ purchasing power. Lower rates often lead to increased demand since monthly mortgage payments are lower, potentially driving prices up.
Broader Financial Implications of Mortgage Rate Changes
Mortgage rate changes influence everything from housing inventory to home affordability. Lower mortgage rates generally increase the demand for new mortgages and stimulate the housing market.
Ways to Prepare for Potential Mortgage Rate Changes
With mortgage rates predicted to decline slightly throughout 2024, you should be proactive if you plan to purchase or refinance.
How to Lock in Low Mortgage Rates
Keep a close watch on economic indicators and predictions. Speak with a mortgage broker early to discuss rate lock options. These can protect you from rate hikes for a set period but be prepared to act quickly when rates dip.
Remember, rate locks typically last 30 to 60 days, though some lenders offer extended periods for a fee. Stay in the loop with your lender, as they can advise on the optimal time to lock in based on current trends. The goal is to secure the best possible rate before the average rates begin to shift upward again.
Considerations for Refinancing
When contemplating refinancing, first assess your current interest rate relative to predicted rates. If you can secure a rate at least 1 percent lower, it may lead to substantial savings.
Consider closing costs and your time horizon in the home. These costs should be recouped through lower payments before you plan to move. Always compare offers from at least three lenders.
Importance of Financial Planning and Budgeting
A solid financial plan is your buffer against an unpredictable economy. Factor the potential variability of mortgage rates into your budget to avoid stretching yourself too thin. Also, maintain a solid credit score and adequate reserves, and save for a sizable down payment. This will give you more leverage and flexibility with lenders.
Conclusion: The Future of Mortgage Rates for 2024
The trajectory for mortgage rates in 2024 isn’t set in stone, and a lot depends on more expansive economic growth and stability. Factors such as inflation, job growth and global economic events will also impact the rates assessed by mortgage lenders and your total borrowing costs.
Understanding the market trends and aligning your financial profile with lenders’ requirements can boost your chances of securing a mortgage with favorable terms, including a competitive interest rate. That way, you’ll have the best shot at getting approved for a home loan that best suits your financial needs and preferences when you decide to apply.
