Mortgage Interest Rates Forecast for 2024: When Will Rates Go Down?
The current mortgage interest rates forecast is for rates to continue their downward trajectory. After spiking to 7.79% last October, rates finally began to drop — managing a 1.18 percentage point decline in just nine weeks. While there are no guarantees, our market expert recommends cautious optimism as we enter 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.
Get Quotes From Up to 5 Lenders, Compare, and Save to get the Best Loan for YouMortgage rates forecast for January 2024
Mortgage rates fell steadily throughout November and December 2023, landing at 6.61% during the final week of the year, according to the Dec. 28, 2023, Freddie Mac Primary Mortgage Market Survey®.
At their last meeting of 2023, the Federal Reserve chose not to raise interest rates, putting even more ground between themselves and the last hike — now more than four 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 a potential end to the Fed’s cycle of rate hikes.
That said, the Fed isn’t expected to start cutting rates until the second half of 2024. And, even when the Fed does start to cut rates, 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.
However, 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 January?
Although January does contain one of the best days of the year to buy a home, home shoppers aren’t likely to see significantly better affordability in January than they did throughout 2023 — at least not yet.
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, low housing supply continues to drive up home prices.
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
7.11 %
6.64 %
Current average rates are calculated using all conditional loan offers presented to consumers nationwide by LendingTree’s network partners on the previous day for each combination of loan program, loan term and loan amount. Rates and other loan terms are subject to lender approval and not guaranteed. Not all consumers may qualify. See LendingTree’s Terms of Use for more details.
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 unfriendly conditions for refinancing are currently reflected in the number of refinance applications, which remain low, though they are 18% higher 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 January 2024
7.31 %
6.76 %
Current average rates are calculated using all conditional loan offers presented to consumers nationwide by LendingTree’s network partners on the previous day for each combination of loan program, loan term and loan amount. Rates and other loan terms are subject to lender approval and not guaranteed. Not all consumers may qualify. See LendingTree’s Terms of Use for more details.
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.
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.
Frequently asked questions
If you can afford your 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 said. 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, Channel added.
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 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 have to pay 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-COVID economy.