Mortgage Interest Rates Forecast for 2024: When Will Rates Go Down?
The current mortgage interest rates forecast is for rates to continue going down. After spiking to 7.79% last October, rates finally began to drop — managing a 1.19 percentage point decline in just 12 weeks. While there are no guarantees, our market expert recommends cautious optimism as we move through 2024.
Progress on inflation, as well as signs from the Federal Reserve that rate cuts may come in 2024, point to the possibility that rates could stay under 7% for most of 2024. If inflation does continue to fall without the broader economy taking a jarring hit, interest rates are likely to remain low and give the housing market a chance to finally pick up steam.
Mortgage rates forecast for February 2024
Mortgage rates have held steady so far this year, landing at 6.63% during the first week of February, according to the Feb. 1, 2024, Freddie Mac Primary Mortgage Market Survey®.
At their first meeting of 2024, the Federal Reserve chose not to raise interest rates, putting even more ground between themselves and the last rate hike — now more than six months in the rear-view mirror.
That decision, combined with recent hints from several Federal Reserve members that inflation may finally be coming under control, has investors and market-watchers abuzz. Everyone is looking ahead to potential rate cuts.
That said, the Fed isn’t expected to start cutting rates until May or June at the earliest. And, even when the Fed does start down that path, we shouldn’t expect a dramatic reduction, said 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 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 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 said.
Will home affordability improve in February?
Although February doesn’t contain any of the best days of the year to buy a home, it isn’t an especially expensive time of year to purchase, either. That said, home shoppers looking for a window of opportunity in today’s expensive housing market may be disappointed. They aren’t likely to see significantly better affordability in February than they did throughout 2023 — at least not yet. That’s because, no matter what interest rates are doing, home prices remain high and have been steadily increasing since February of last year.
The recent decrease in mortgage rates has helped move the needle slightly, but until rates and home prices start to drop, we’ll likely see affordability remain low, Channel said. So far, even with the recent dip in rates at the end of 2023, low housing supply continues to drive up home prices. The national median mortgage payment has risen by $135 over the last year, and now sits at a hefty $2,055.
Compared to this time last year, home sales remain quite low due to those high rates and the “mortgage rate lock-in” effect, which makes homeowners reluctant to sell, driving down inventory. Nearly 60% of existing homeowners have mortgages with rates below 4%, which represents savings of around $66,000 per year 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.
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 upward march — moving ever further from the sanguine rates of 2021 which, even at their highest point, barely exceeded 3%. The unfriendly conditions for refinancing are currently reflected in the number of refinance applications, which are 8% lower than this time last year, according to the latest Mortgage Bankers Association (MBA) weekly mortgage applications survey.
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 added.
Current refinance rates for February 2024
Will mortgage rates go down in 2024?
“In the longer run, cooling inflation and an end to the Fed’s current rate-hiking cycle should help bring mortgage rates down,” Channel said. “Don’t assume that rates are guaranteed to stay under 7%, but do recognize that factors like slowing inflation growth point to rates falling in 2024.”
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 added.
Read more about how mortgage rates are determined.
How to get the best mortgage rates
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.
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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.
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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.