Mortgage Interest Rates Forecast for 2024: When Will Rates Go Down?
The current mortgage interest rates forecast is for rates to embark on a gentle downward trajectory over the remainder of 2024. Rates rose steadily in early spring, finally breaking 7% for the first time this year in April. They then remained just under 7% throughout most of June. We can expect slightly lower rates in July — perhaps in the high 6% range — but don’t expect rates to drop precipitously.
There are no guarantees, but our market expert recommends cautious optimism during the early part of the summer season. Progress on inflation, as well as signs from the Federal Reserve that rate cuts may be on the horizon, point to the possibility that rates could still stay under 7% for most of the year. If inflation does continue to fall without the broader economy taking a jarring hit, interest rates are likely to dip and give the housing market a chance to finally pick up steam.
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Mortgage rates forecast for July 2024
Mortgage rates held steady for the first three months of 2024, remaining confined to the small space between 6.5% and 7%. They then began to climb in April, however, finally exceeding 7% and remaining there for several weeks. By the first week of June, rates dipped below 7% once again, and remained there for the rest of the month, ultimately landing at 6.86%, according to the June 27, 2024, Freddie Mac Primary Mortgage Market Survey®.
At each of their meetings in 2024, the Federal Reserve has chosen not to raise interest rates, putting even more ground between themselves and the last hike — now more than 11 months in the rearview mirror.
Those decisions, combined with the Fed’s intention to make several rate cuts in 2024, has had investors and market watchers abuzz. For the first several months of 2024 everyone was looking ahead to potential cuts.
However, the expected arrival time for those cuts has been continually pushed back as, month after month, the Fed continues to see elevated inflation figures. Cutting rates too soon could make inflation worse so, for now, the Fed isn’t expected to make a cut until late summer or early fall. And, even when the Fed does start to cut rates, we shouldn’t expect a dramatic reduction, according to Jacob Channel, LendingTree’s senior economist. Instead, we’ll probably see some gradual 25-basis-point cuts here and there. If that happens, rates could still fall to closer to 6% by the end of 2024.
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.
Will home affordability improve in July?
As one of the more expensive months of the year in which to purchase, July doesn’t contain any of the best days of the year to buy a home. That fact, combined with high interest rates that topped 7% in April and May, and dipped only slightly in June, means the housing market continues to be pricey. Potential homebuyers shouldn’t expect significantly better affordability in July than they saw during the first six months of this year or in 2023.
Until rates and home prices both start to drop, we’ll likely see affordability remain low, Channel says. So far, low housing supply continues to push home prices up. The national median home price reached new heights in May, and now sits at a record high of $419,300.
Why is there a housing shortage?
High rates and the “mortgage rate lock-in” effect, which makes homeowners reluctant to sell, continues to drive home prices up. As of late 2023, nearly 60% of existing homeowners had mortgages with rates below 4%, which represents savings of around $66,000 over the life of the loan compared to current rates. 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 remain quite low compared to 2023. Purchase volume was down by 13% compared to this same time last year, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey for the week ending June 21, 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%.
The conditions for refinancing are pretty unfriendly right now. Despite this, the number of refinance applications are up by about 26% compared to one year ago, according to the MBA’s latest data.
Refinancing homeowners may be reacting to relatively high rates with a desire to get in before things can get any worse, but Channel believes this small uptick in refinances is likely just a blip and urges caution. He advises borrowers to carefully consider their options before getting a new mortgage. “A knee-jerk decision made because you think the sky is falling is more likely to cause you heartache than it is to make your life easier,” he says.
There are a few niche circumstances when a refinance might make sense, such as refinancing an adjustable-rate mortgage (ARM) to a fixed-rate loan, Channel adds.
Current refinance rates for July 2024
Will mortgage rates go down in 2024?
Although inflation is cooling more slowly than expected, it is cooling. This, and the Fed’s cuts, should help bring mortgage rates down. “There’s still plenty of time for mortgage rates to decline before 2024 comes to an end,” Channel says. “If inflation growth does continue to cool, we may see a Fed rate cut of 25 basis points in September. Depending on how that shakes out, two more 25-basis-point cuts in November and December are both still possible.” If we do see cuts, mortgage rates should drop.
On the other hand, hot inflation, additional pressure on rates from the Fed and waning demand for U.S. bonds could push rates higher, he adds.
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 payments, not a “perfect” rate. And for now, getting into the market means making peace with a 6.5%-plus rate.
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 780 credit score 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.
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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 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.