Mortgage Interest Rates Forecast for 2024: Will Rates Continue to Drop?
The current mortgage interest rates forecast is for rates to continue on a gentle downward trajectory over the remainder of 2024. We can expect slightly lower rates in September — perhaps in the mid- or even low-6% range — but don’t expect rates to drop very steeply.
There are no guarantees, but our market expert recommends cautious optimism as we wrap up 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.
Mortgage rates forecast for September 2024
The Federal Reserve has signaled that it’s likely to make a cut in September and, if it does, mortgage rates should go down. However, 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, mortgage rates could still fall to closer to 6% by the end of 2024.
Rates rose steadily in early spring, finally exceeding 7% for the first time this year in April. Since late May, however, they’ve remained under 7% and dropped to their lowest point in more than 15 months during August. By the end of August, rates had dipped well below 7% once again, landing at 6.35%, according to the Aug. 29, 2024, Freddie Mac Primary Mortgage Market Survey®.
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 September?
Potential homebuyers can expect slightly better affordability in September than they saw during the first eight months of this year or at any time in 2023.
Historically, September is a less expensive month in which to make a house purchase. In fact, it contains the sixth best day of the year to buy a home, according to an analysis of home sales between 2013 to 2022 by ATTOM. That fact, combined with interest rates that have finally dipped south of 6.5% for the first time in over three months, means that the housing market continues to be pricey but could be heading in the right direction.
Until rates and home prices both start to drop, though, we’ll likely see affordability remain low, Channel says. So far, low housing supply continues to push up home prices. The national median home price reached new heights in July, and now sits at a record high of $422,600.
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 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 9% compared to this same time last year, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey for the week ending Aug. 23, 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 some interesting shifts in August. The number of refinance applications are up by 85% compared to one year ago, according to the MBA’s data for the week ending Aug. 23. That’s a very notable increase and, even though many market watchers consider it a blip rather than a new normal, only time will tell.
“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 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 September 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 monthly payments, not a “perfect” rate. And for now, getting into the market means making peace with a rate in the mid-6% range.
Will the presidential election affect mortgage rates?
Dramatic political events can sometimes have a notable impact on things like interest rates and inflation but, according to Channel, political news is unlikely to play a huge role in what the economy does over the coming weeks and months.
“Despite the Trump assassination attempt and Biden dropping out of the presidential race, the broader economy changed very little” Channel says. More dramatic news could trigger more notable changes, of course, but Channel thinks that “As things stand, we’re probably not going to see rates or inflation move all that much in the face of political news.”
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.
Ready to see competitive rate offers on LendingTree? Get Personalized Rates TodayFrequently 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 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.