Mortgage Interest Rates Forecast for 2024: Will Rates Drop in December?
The current mortgage interest rates forecast is for rates to dip slightly in December, but remain elevated compared to where they were pre-pandemic. There’s a possibility that the Federal Reserve will cut rates again in mid-December — and if it does, we’ll likely see rates trend downward as we head into the final weeks of the year.
Our market expert is feeling less optimistic than he has in recent months, due mostly to bond market turmoil, which is the main driver behind rising mortgage rates. Mortgage rates rose by 69 basis points between the first week in October and the last week in November, a reflection of investors’ worries about inflation and what’s on the horizon with the next Trump administration. He predicts that high rates and low affordability will continue to keep the housing market sluggish.
Mortgage rates forecast for December 2024
After the Federal Reserve’s first rate cut of the year in September, 30-year mortgage rates dropped to their lowest point in more than two years. But we didn’t see as strong a reaction after the second cut in November, and we’re not guaranteed a significant drop if the Fed institutes a third cut in December.
A cut doesn’t always send mortgage rates down, according to Jacob Channel, LendingTree’s senior economist. And, in the short-term, Channel believes the Fed’s upcoming cuts won’t do all that much to ease bond investors’ concerns about what the future may bring.
“The higher Treasury yields go,” he notes, “the higher mortgage rates are likely to trend as well.”
In a best-case scenario, mortgage rates could fall closer to 6% by the end of 2024, but they aren’t expected to dip much lower than that — and rates could also go the other direction if the economy weakens or inflation rises. Still, Channel expects rates to remain high compared to the levels seen during the height of the COVID-19 pandemic, when average 30-year mortgage rates were around 2.65%. Those record lows, as nice as they were, might not ever be seen again in our lifetimes, Channel says.
How does the Federal Reserve affect mortgage rates?
→ A Federal Reserve rate cut directly affects adjustable-rate mortgages, since their interest rates are calculated using a number — known as an index — that fluctuates with the broader economy. The Fed’s cuts are to the federal funds rate, which is a benchmark index.
→ The Fed’s rate cuts indirectly impact fixed-rate mortgages, which can move more independently and, in some cases, can even move in the opposite direction of the federal funds rate. That said, when the federal funds rate drops, mortgage rates tend to follow. They can also drop in anticipation of a federal funds rate cut, as they did just before the Fed’s recent rate cut.
Will home affordability improve in December?
Potential homebuyers shouldn’t expect significantly better affordability in December than they saw during most of the last few months.
Historically, December is one of the least expensive months to buy a house. In fact, the absolute best day of the year to purchase a home — the day on which you pay the lowest premium — is Dec. 5, according to an analysis by real estate data company ATTOM. That said, the housing market continues to be prohibitively expensive for many Americans. Median home prices have risen by 28% in the last four years, landing at $420,400 in the third quarter of 2024.
The small rate dip we’re likely to see in December won’t be enough to change overall affordability for most.
“Demand in December 2024 may end up a bit higher than demand in December 2023,” says Channel. “Nonetheless, until rates show more significant and sustained declines, mortgage demand — and by extension overall housing market activity — is probably going to remain sluggish.”
Why is there a housing shortage?
High rates and the “mortgage rate lock-in” effect, which makes homeowners reluctant to sell, continue to drive up home prices. As of mid 2024, the average homeowner had a mortgage with a rate 2.5 percentage points lower than the current market rate. That’s why they’ll likely need to see rates come down further before feeling like it’s time to venture back into the market.
Home sales are picking up but remain low compared to 2023. Purchase volume was up by 52% compared to this same time last year, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey for the week ending Nov. 27, 2024.
Mortgage rates this week
Mortgage rates predictions for refinancing in 2024
Refinancing doesn’t make sense for most homeowners sitting on the low rates they locked in before 2022. That’s when the market began its march upward — moving ever further from the sanguine rates of 2021 which, even at their highest point, barely exceeded 3%.
But, despite the conditions for refinancing being pretty unfriendly throughout 2024, we saw a shift once fall hit. Compared to the same period in 2023, the number of refinance applications were up by 111% on average in October and 63% in November, according to the MBA’s data for the weeks between Oct. 1 and Nov. 22. That’s a notable increase, but we also need to remember that refinance demand is in the process of recovering from extreme lows.
“Refinancing still remains relatively uncommon from a long-term historical perspective,” Channel adds, “and extremely low relative to where it was during the height of the pandemic. Even if more people are thinking about refinancing today than they were a year ago, we’ve still got a long way to go before it becomes as common as it ‘usually’ is.”
Who does refinancing make sense for right now?
A refinance might make sense for some borrowers as long as they know exactly what benefit they’ll be getting out of it. For example, if you’re refinancing an adjustable-rate mortgage (ARM) to a fixed-rate loan, converting equity to cash with a cash-out refinance or getting a new interest rate that will lower your payments.
Should I wait to refinance after the Federal Reserve’s next interest rate cut?
If you can afford to wait for rates to potentially go lower, Channel notes that it could quite literally pay off. “But, if you’re teetering on the edge of financial ruin or otherwise desperately need to replace your current mortgage with a new one, then you should act sooner rather than later,” he adds.
Channel recommends waiting to refinance when you could get a rate that’s at least 50 basis points
Basis points are units used to measure changes in interest rates. One hundred basis points are equal to 1 percentage point, so 50 basis points are equal to 0.50%.
lower than the one you already have — and ideally 75 to 100 basis points lower.
Current refinance rates for December 2024
Will mortgage rates go down in 2025?
Although pandemic-related inflation took longer to cool than expected, it is cooling. This should help bring mortgage rates down.
“However, in the short term the Fed’s upcoming cuts probably won’t do all that much to assuage bond investor concerns about what the future may bring,” Channel says. “As long as Treasury yields remain high, mortgage rates will also stay steep.”
On the other hand, we need to bear in mind that mortgage rates ebb and flow, and can increase for weeks at a time even when in the midst of a longer-term downward trend.
Ultimately, Channel urges homebuyers to focus on what they can afford in the current market rather than obsessing over the future. It’s impossible to time the market, but borrowers only need to concern themselves with securing affordable monthly payments, not a “perfect” rate. And for now, getting into the market means making peace with a rate above 6%.
Will Trump’s transition into the White House affect mortgage rates?
A new president doesn’t always have a notable impact on things like interest rates and inflation but, according to Channel, the upcoming transition could have a notable impact on what happens with mortgage rates.
Trump and those around him have proposed privatizing Fannie Mae and Freddie Mac, imposing large tariffs, stripping the Fed of its autonomy and gutting HUD — actions that would have major impacts on the housing market and the broader economy, Channel added.
“Depending on what laws Trump manages to enact next year, the housing market in 2025 and beyond might be even tougher to navigate than it is today,” he adds.
How to get the best mortgage rates
1. Boost your credit score
Pay your bills on time, minimize your credit card balances and avoid opening several new credit accounts at once. You’ll get the best conventional mortgage rates with a credit score of 780 or higher.
Learn more about ways to boost your credit score.
2. Compare rates from multiple lenders
LendingTree data consistently show that consumers who shop around for mortgage rates typically save money. Get a loan estimate from three to five different mortgage lenders and compare the rates and terms you’re offered.
Learn more about our picks for the best mortgage lenders.
3. Consider paying points
A mortgage point costs 1% of your loan amount, and paying for points allows you to “buy” a cheaper interest rate. Read the fine print if you see an online rate that looks lower than what other lenders are offering — there’s a good chance you’ll pay points to get it.
Ready to see competitive rate offers on LendingTree?Frequently asked questions
If you can afford a mortgage and find a home that suits your needs, now can be a good time to buy, despite high rates and a limited number of homes for sale.
“Remember that timing the market is extremely difficult, if not outright impossible,” Channel cautions. “If you’re waiting to make a choice based on what you hope will happen instead of what’s already going on, you could end up missing out on a lot of good opportunities — even in today’s expensive housing market.”
“For there to be an outright crash, we’d need to see the housing market flooded with homes for sale, and that probably won’t happen as long as homeowners can continue to afford their mortgages,” Channel says. Homeowners seem well-equipped to keep making payments, as evidenced by data that show a shrinking foreclosure inventory and a low rate of serious delinquencies, he adds.
A mortgage interest rate is the base rate you’re charged to borrow money, but a mortgage annual percentage rate (APR) is the total cost of taking out a mortgage (the interest rate plus closing costs and fees). Both numbers are expressed as a percentage. For more details, check out our guide to distinguishing an APR versus interest rate.
The Federal Reserve’s monetary policy indirectly impacts fixed-rate mortgages, which are often tied to the 10-year U.S. Treasury bond yield. The Fed’s policies have a direct effect on loans with variable interest rates, including ARMs, credit cards and home equity lines of credit (HELOCs).
Haggle for a lower interest rate by using your mortgage offers as leverage. Ask each lender about matching your lowest quoted rate. Consider making a larger down payment, select an ARM loan with a lower initial rate or ask your lender about your mortgage buydown options.
Discuss mortgage rate lock options with your loan officer once you’re under contract on a home and moving through the application process. Rate locks usually last between 30 and 60 days, but they can be longer. Watch your expiration date — you may face a rate lock extension fee if your loan doesn’t close before your rate lock expires.
Mortgage rates dropped to a historical low of 2.65% in January 2021, when the Federal Reserve cut the federal funds rate to 0% to stabilize the post-pandemic economy.