Will mortgage rates ever be 5 again?
Current forecasts indicate a cautious optimism for a decline in mortgage rates by the end of 2024, though not necessarily below 5%. Here are some expert predictions: Fannie Mae anticipates the 30-year fixed-rate mortgage to fall to 6% by end-2024.
Yes, mortgage rates are likely to go down in 2025. Average 30-year mortgage rates are currently below 6%, and they may fall further into the 5% range next year.
This is a significant increase from the 3% rates we enjoyed a few years but fundamentally, 6.8% is not a bad rate, historically speaking. US News: Economists at US News predict that mortgage rates will gradually decline throughout 2024. However, they don't expect the rates to fall below 6% until at least 2025.
"If we're talking about a conventional 30-year fixed with 25% down and a 740 credit score, I'd say we'll hit around 5.5% to 5.75% by the end of 2024," Green says. Green believes rates will continue to drop as we enter 2025, barring unexpected inflation spikes.
Market Expectations
However, if the Fed does cut rates more aggressively than expected, maybe mortgage rates could move lower. Broadly speaking, the market is projecting that short-term interest rates will end 2024 at close to 4% and then be in the region of 3% in December 2025.
"While rates are expected to bounce around a bit, we expect them to be in the low 6% range by year's end," says Realtor.com Chief Economist Danielle Hale. "The Realtor.com forecast also anticipates that mortgage rates will move lower, perhaps into the upper 5% range by the end of 2025."
Mortgage rates should continue declining this year as the U.S. economy weakens, inflation cools and the Federal Reserve continues to cut interest rates. The 30-year fixed mortgage rate is expected to fall to the low-6% range through the end of 2024, dipping into high-5% territory in 2025.
The same day the Fed cut the federal funds rate, Fannie Mae released its September housing forecast. The organization now predicts 30-year mortgage rates will be at 6.2% by the end of 2024 and 5.7% by Q4 2025.
Interest-rate forecast.
We project the federal-funds rate target range to fall from 4.75%-5.00% currently to 4.50%-4.75% at the end of 2024, 3.00%-3.25% at the end of 2025, and 2.00%-2.25% by the end of 2026, after which the Fed will be done cutting.
Yes. This is the best time to buy a house in California. With the current trend in the CA housing market, you'll find better deals on your dream home during Q2 2024. As per Fannie Mae, mortgage rates may drop more in Q2 of 2024 due to economic changes, inflation, and central bank policy adjustments.
Should I lock my mortgage rate today?
If you're risk-averse and want to avoid any chance of your mortgage rate increasing, locking in your mortgage rate today may be the best option. But rates will probably keep ticking down in 2024 and 2025, so if you think rates will drop before you make an offer, choosing not to have a rate lock could make more sense.
Fannie Mae's August 2024 forecast (its latest at the time of writing) predicts that 2025 rates will start at 6.2% and trickle downwards by 0.1% each quarter, landing somewhere near 5.9%.
Yes. The mortgage rate forecast for the remainder of 2024 is that mortgage rates are expected to nudge down. Lenders started slashing mortgage rates amid the Bank of England's decision to cut the base rate from 5.25% to 5% on the 1st August, for the first time since March 2020.
- Live in the home yourself as a primary residence.
- A credit score above 580.
- A debt-to-income-ratio below 50%.
- The ability to fund the down payment either in cash or with the support of a second loan at current interest rates.
Key takeaways. The Federal Reserve is expected to lower rates by at least 100 basis points through the end of 2024. As such, primary mortgage rates could fall by as much as 60 bps over the next year — and by even more if the rates market begins to price in more cuts than are currently expected.
Mortgage rates are unlikely to drop back down to the historic lows of 2020 and 2021, when 30-year fixed rates fell below 3%. But rates are expected to continue to ease throughout the next year or two, and it's possible rates could ultimately settle in closer to 5% in a few years.
Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage, says rates could drop but isn't sure whether they'll dip below 6% this fall. However, she does say, "we expect to see average 30-year fixed rates moving toward the 5s over the course of 2025."
However, increases should slow between 2024 and 2026, and rates may even decline in 2027. Among the factors that could impact mortgage rates in the next 5 years are inflation, Federal Reserve policy, and economic growth. Homebuyers should consider locking in a low mortgage rate now, as rates are expected to rise soon.”
For example, if the Federal Reserve continues its rate-cutting campaign over the next few months, mortgage rates could drop even further. If you're in no rush to buy, waiting might allow you to take advantage of lower rates down the line. Explore the best mortgage rates available to you now.
With profit margins that actually expand as rates climb, entities like banks, insurance companies, brokerage firms, and money managers generally benefit from higher interest rates.
What will mortgage rates be in January 2025?
In January 2025, I predict the average 30-year mortgage rate will be about 6%, not too far below where it is right now. By December 2025, I predict the average 30-year mortgage rate will fall to approximately 5.1%, which would make a big difference in the cost of homeownership.
A general rule of thumb is that it makes financial sense to refinance your mortgage if you can secure a rate that's at least 1% lower than the one you currently have.
As mortgage rates near 5.00%, likely in 2026, homeowners with these higher rate mortgages as well as those with rates between 4.00% and 5.00%, about 19% of outstanding mortgages, should be more willing to sell their homes and assume a new mortgage.
By the end of 2024, interest rates will fall another half of a percentage point from their current level of between 4.75% and 5%, according to FOMC projections. Interest rates will drop another percentage point over the course of 2025, the projections further indicated.
When inflation is running high, the Fed raises those short-term rates to slow the economy and reduce pressure on prices. But higher interest rates make it more expensive for banks to borrow, so they raise their rates on consumer loans, including mortgages, to compensate.
