“A better tone of inflation data and evidence of slowing economic growth should bring mortgage rates below the 7 percent mark,” says Greg McBride, CFA, chief financial analyst for Bankrate.
Will mortgage rates go down in 2024? Mortgage rates could fall in 2024, but that's not a given. The Mortgage Bankers Association projects a 6.6% rate by the end of the year, while Fannie Mae predicts 2024 will end with rates at 6.7%.
The WSJ prime rate provides a gauge for the prime rate at banks across the industry. The WSJ prime rate has historically been approximately 3% higher than the federal funds rate. Thus, the rate is heavily influenced by the Federal Reserve's monetary policies.
In its June Mortgage Finance Forecast, the Mortgage Bankers Association predicts that mortgage rates will fall from 7% in the second quarter of 2024 to 6.6% by the fourth quarter. The industry group expects rates will fall to 6% at the end of 2025 and will average 5.8% in 2026.
By reducing its bond purchases, the Fed will reduce the supply of money in the market and put upward pressure on long-term interest rates, such as mortgage rates. Therefore, unless inflation slows down significantly in the coming months, it is unlikely that mortgage rates will fall back to 3% anytime soon.
Also, mortgage rates are still much higher than we've been used to in recent years. On 30 May 2024, the average 2 year fixed mortgage rate is 5.80%. While this is a significant drop from its July 2023 peak of 6.86%, it's still much higher than December 2021 when was 2.34%.
Many prospective homebuyers chose to wait things out in 2023, in the hopes that 2024 would bring a more advantageous market. But so far, with mortgage interest rates still relatively high and housing inventory stubbornly low, it looks like 2024 will remain a challenging time to buy a house.
Projections suggest that we may see no rate increases in 2024, and that the Fed might start dropping its rate later this year, according to the CME FedWatch Tool on June 11. If the Fed rate drops, CD rates will likely follow suit, though it's up to each bank and credit union if and when that occurs.
Long Forecast presents a scenario where mortgage rates embark on a downward trend starting in 2025, with a significant dip in January 2026. Their prediction suggests rates could plummet to 4.87%, a welcome relief for those facing the current market climate.
Think about your cost structure and debt load carefully for 2024. The prime rate today is 8.5%. The Fed signaling cuts equivalent to 75 basis points would put prime between 7.5% and 7.75%. This, of course, assumes the 30-year average spread between the fed funds rate and Prime holds.
The Federal Reserve has decided to hold interest rates steady after its meeting on June 11 and 12, 2024. The federal funds target rate has remained at 5.25% to 5.5% since July 2023.
Introduction: My name is Kimberely Baumbach CPA, I am a gorgeous, bright, charming, encouraging, zealous, lively, good person who loves writing and wants to share my knowledge and understanding with you.
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