When Will Mortgage Rates Go Down?
Mortgage rates have already dropped by more than 0.5% between May and September. While the Federal Open Market Committee has yet to lower the benchmark interest rate, the market often reacts in advance of anticipated Fed policy changes. This, along with several other factors, helps drive mortgage rate fluctuations.
According to an August housing outlook from Freddie Mac, “The anticipation of an upcoming rate cut is already influencing the market, leading to downward pressure on mortgage rates.”
However, even with the market expecting a Fed rate cut, it’s unlikely that mortgage rates will see a significant decline right away. As Jessica Lautz, the deputy chief economist and vice president of research at the National Association of Realtors (NAR), noted in a September statement, lenders have already “priced in” the anticipated rate cut.
Although a sharp drop is not expected, experts predict that mortgage rates will continue to moderate through the remainder of the year. If economic conditions weaken further, we may see several rate cuts over the next 18 months. That said, rates are not expected to return to the 3% or 4% range anytime soon. The best-case scenario is a gradual decline to the higher 5% range by the end of 2025.
Here are the current predictions for mortgage rates through the end of 2024:
- Fannie Mae: Rates are expected to decrease to 6.4% by year-end. In 2024, rates are projected to average 6.7%, and in 2025, they may drop further to around 6%.
- Mortgage Bankers Association (MBA): The MBA predicts rates will fall to 6.5% by the fourth quarter of 2024. Looking ahead, they expect rates to dip to 5.9% by the end of 2025 and stay at that level into 2026.
- Realtor.com: According to a recent update, Realtor.com anticipates rates will close out 2024 at around 6.3%, down from their previous forecast of 6.7% earlier this year.
- Wells Fargo: In its U.S. Economic Outlook, Wells Fargo expects the 30-year fixed mortgage rate to decline to 6.25% by the end of 2024, with rates falling below 6% by mid-2025.
While mortgage rates are trending downward, the pace of decline will depend on a variety of factors, including economic conditions and Federal Reserve decisions. Stay informed and work closely with your financial advisor or mortgage professional to make the best decisions for your home financing needs.