Mortgage rates have spiked in the past few years. The average 30-year mortgage rate in the United States reached over 8%, and house prices keep climbing while there are fewer houses up for sale. So, what do the mortgage experts say—will mortgage rates go down in 2024?
The good news is that some experts predict a fall in mortgage rates in mid-2024. The bad news is that these rates probably won’t return to the record lows that 2020-2021 enjoyed. Housing prices aren’t likely to decrease either.
As a top mortgage broker in Houston, Champions Mortgage shares more insight into the expected mortgage rate changes for next year below.
Why Are Mortgage Rates So High?
If you’re asking about mortgage rate trends, you might be wanting to buy, sell, or enter the market for the first time. Wherever you’re standing, it pays to understand why mortgage rates are so high in the first place.
You may have missed the news while you were locked down in your home or taking work meetings on video chat platforms. However, the 30-year fixed rate actually fell to incredible lows (2.65%) during the height of the COVID-19 pandemic. That led the Federal Reserve to raise the interest rates by 0.25% in March 2022, the first time they had done so in four years.
However, the Federal Reserve has bumped interest rates at least 11 times since then in a bid to stabilize prices and curb unemployment. Borrowing has become expensive as a result, which has meant that countless prospective homebuyers have put off their property searches. Will prices fall to affordable levels again, and how long will they have to wait?
What Will Happen Next Year?
For now, predictions vary about house prices and mortgage rates. What’s going to happen to mortgage rates in 2024 is still a bit of a mystery, but the data has followed similar trends in the past. Here are some ideas about next year:
Reaching Inflation Targets Might Slash Rates
One of the main goals of the slew of interest rate hikes was to slow inflation, which was at a four-decade high by the middle of 2022 but dropped off significantly in 2023. We may start to see the Fed slashing interest rates as we reach the projected inflation targets by the end of the year.
The 10-Year-30-Year Spread May Close
The 10-year Treasury and 30-year fixed mortgage interest rates keep pace, but there is some volatility. The long-term average for the 30-10 spread is 0.50%. 2023’s spreads have been sliding closer to 0.15%, which is a good sign for interest rates following the same downward trajectory.
The Economy is Cooling Off
The economy has been in overdrive, driving high inflation and volatile pricing. Is it cooling off as some predict? The Federal Reserve may drop interest rates if economic growth slows.
Conflict Introduces Uncertainty at Home
Global conflict continues, which might throw a spanner in the works for predictions on next year’s mortgage rates. The Ukraine-Russian war and Israel-Palestine escalation notwithstanding, unexpected effects on global supply chains may yet emerge. If you’ve been staking your hopes on 2024’s mortgage rates, you may want to keep your options open.
What Do Leading Organizations Think About Interest Rates?
Will mortgage rates go down in 2024? What do the major players say? According to Fannie Mae, the National Association of Realtors, and the Mortgage Bankers Association, the answer is yes, we should expect interest rates to fall.
- Fannie Mae predicts mortgage rates will fall to 6.5% by the middle of 2024.
- The MBA predicts sub-6% levels by the end of 2024.
- The NAR predicts 6.5% by Q3 2024 and a flat 6.0% by Q4 2023.
Factors That Will Affect Interest Rates in 2024
Many economists believe that interest rates will stabilize and then fall in the next year. Still, the following factors may change how this plays out:
Inflation
Inflation has come down significantly since 2022. If it continues to drop, you might start seeing relaxed interest rates. With inflation’s direction not clear yet, there’s still the possibility it will continue to rise after this brief respite.
Economic Growth
The economy has been white-hot with excellent job growth, wage growth, and low unemployment numbers. Of course, the downside of a thriving economy is the increased demand and consumer activity, which boosts inflationary pressures. Then, if everyone feels the pinch of rising inflation and the economy slows as consumers pull back, interest rates and mortgage rates might fall as the government tries to get things going again.
Political Change
The trajectory of interest rates also depends on various political developments. For example, Congressional action could theoretically halt interest rate hikes, while innocuous staffing changes at the Federal Reserve could affect monetary policy. COVID-19 is also a pressing concern, with data indicating rising caseloads across the United States and authorities debating what to do about it.
The Thing to Remember About Interest Rates
Mortgage interest rates are extremely sensitive to economic conditions. Changes are often beyond human control, as war, natural disasters, and other unpredictable events drive the numbers one way or the other. Predictions are just that— a guess—and mortgage borrowers shouldn’t take them as the final word.
What Does This Mean for My Mortgage Rate?
Where you are in the house-buying process matters here. If you do not own a home, falling mortgage rates are extremely positive, as financing a house will be more affordable. Similarly, if you currently own a fixed-rate mortgage, falling interest rates are a great reason to consider refinancing that loan to one with a lower interest rate.
Either way, experts seem to agree that the interest rates will stay at above 5% for the foreseeable future. Will rates ever fall back to 2020 levels? That’s still an open question.
Unbeatable Rates and Speedy Closings
Will mortgage rates go down in 2024 in the way you hope? Why not read our tips for first-time home buyers and browse some opportunities while you wait to see who’s right about next year? Champions Mortgage can help you find the best deals on home loans!
