For homebuyers who have been waiting for a significant drop in mortgage interest rates, this news may come as a bit of a disappointment. Experts predict that interest rates are likely to remain stable at or above 6% for the remainder of 2024. This means that the ultra-low interest rates that have been hovering around 3% for the past few years are unlikely to return in the near future. The main factors behind this trend are the Federal Reserve's interest rate hikes and the overall economic situation.
Mortgage interest rates forecast for the end of 2024
Current Trends and Forecasts
Mortgage rates had remained historically low throughout the pandemic but have since surged in the wake of the Federal Reserve's aggressive rate hikes. The increases helped push home sales last year to their lowest since 1995.
According to Freddie Mac, as of July 3, 2024, the 30-year fixed-rate mortgage is at 6.95%, up 0.09% from the previous week and 0.14% from a year ago. The 15-year fixed-rate mortgage is at 6.25%. While these are down slightly from the highs in April and early May, when average rates were above 7%, they are still quite high.
Expert predictions
Several major agencies have released their forecasts for mortgage rates through the end of 2024.
Fannie Mae and the National Association of Realtors (NAR) both expect the average interest rate on a 30-year mortgage to decline modestly to around 6.7% by the end of the year. The Mortgage Bankers Association is a bit more optimistic, predicting rates will reach 6.6%. Freddie Mac projects rates will fall to 6.5% by the end of 2024.
Freddie Mac's June Economic, Housing, and Mortgage Market Outlook stated that “mortgage rates have been volatile over the past month but we expect them to remain above 6.5 percent through the end of the year.”
The Federal Reserve's Impact
Market participants and home buyers are eagerly awaiting the Federal Reserve to cut its key interest rate, which will ultimately lead to lower mortgage rates. However, the Fed has been reluctant to make such moves so far, as it is wary of inflation. Lawrence Yun, chief economist at the National Association of Realtors, noted that “if the gap between the 10-year Treasury yield and the 30-year mortgage rate narrows, mortgage rates could fall even before the Fed cuts rates.” However, he warned that the gap may not narrow given the uncertain outlook for community banks.
What does this mean for home buyers?
Rising mortgage rates are having a major impact on homebuyers: “The mortgage payment for a typical home today is more than double what it was for a home purchased before 2020,” Yoon noted. But even with mortgage rates remaining high and average home prices near pandemic record highs, some Americans are still buying homes.
Melissa Kohn, regional vice president of William LaVais Mortgage, told Newsweek that buyers in this market are often people who feel they've waited long enough and are ready to buy. “They're not going to wait any longer,” Kohn said. Kohn also said some buyers are thinking it's wise to take advantage of current home prices, because prices will likely rise once mortgage rates eventually fall.
Future outlook
The mortgage market remains in a state of flux as 2024 draws to a close. Forecasts suggest interest rates will remain above 6%, but are expected to decline slightly to levels around 6.5% to 6.7%. Homebuyers should stay informed, evaluate their financial readiness, and consider both current interest rates and future market conditions before making a decision.
In summary, while mortgage interest rate forecasts indicate a gradual decline, they are unlikely to fall significantly before the end of 2024. Prospective homebuyers should prepare for a market in which mortgage rates remain relatively high, requiring careful financial planning and strategic decision-making.
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