Housing Interest Rates and the 2024 Market (2024)

FAQs

Housing Interest Rates and the 2024 Market? ›

Many forecasts predict mortgage rates will decrease gradually through 2024 and 2025, with the 30-year fixed rate likely to drop below 6.5% by the fourth quarter. However, this decline may be slow, and short-term rate increases are possible.

Mortgage rates are expected to continue trending down through 2024 and into 2025, and we could see rates drop further into the 5% range.

Monetary Policy Summary, August 2024

At its meeting ending on 31 July 2024, the MPC voted by a majority of 5–4 to reduce Bank Rate by 0.25 percentage points, to 5%. Four members preferred to maintain Bank Rate at 5.25%.

Leading forecasts suggest that by 2026, the average mortgage rate could drop to around 5.0% according to various sources, including the predictions shared by financial analysts on platforms such as Morningstar. They suggest a gradual decline will continue, culminating in rates around 4.5% to 4.25% by 2027.

While mortgage rates could fall in 2024, it's not a given. 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 if you think rates will drop before you make an offer, choosing not to have a rate lock could make more sense.

In 2024, homebuyers will likely see mortgage rates fall. But home prices will remain elevated. Hopeful buyers should start preparing as early as possible by saving money and improving their credit. Look into affordable mortgage programs and down payment assistance to boost affordability.

Mortgage rate predictions

As you can see, both predict rates will drop over the coming year or two, but very gradually. Experts also don't expect any drastic dips in rates — say to 3% or 4%, as experienced during the height of the COVID-19 pandemic.

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%.

As of August 2024, the national average interest rate on a savings account was 0.46%, according to FDIC data. However, the best online savings accounts offer rates near or above 5.00% APY.

How high could mortgage rates go by 2025? ›

Mortgage rates should continue declining this year as the U.S. economy weakens, inflation cools and the Federal Reserve cuts interest rates. The 30-year fixed mortgage rate is expected to fall to the low-6% range through the end of 2024, potentially dipping into high-5% territory in 2025.

Bank of America economists predict that house prices will remain high until at least 2026. Their report suggests that while the rapid price surges experienced during the pandemic will cool down, prices will not drop significantly.

National Housing Market Predictions for 2025-2029

Although a recession is no longer predicted, economic growth is expected to decline from 2023's fairly robust rate of 2.5% to 2.1% in 2024 and 2% in 2025.

When you lock the interest rate, you're protected from rate increases due to market conditions. If rates go down prior to your loan closing and you want to take advantage of a lower rate, you may be able to pay a fee and relock at the lower interest rate. This is called “repricing” your loan.

It depends on your personal situation. If you're comfortable with the amount of money you'll pay on a mortgage with a higher interest rate, buying may be a good choice. Consider your finances before making a decision and only buy a home if you're sure you can afford it.

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.

In general, mortgage rates are expected to continue trending down in 2025 as the Fed lowers its benchmark rate and inflation cools. But that forecast could change depending on how the economy evolves next year.

The auto loan rate forecast for 2024 suggests a cautiously optimistic outlook. While rates are not expected to plummet, there is potential for a modest decline as the year progresses, particularly if inflation continues to subside and the economy remains stable.

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.

The result is that dramatic changes in mortgage rates in 2024 are relatively unlikely and Irish borrowers will probably have to get used to higher mortgage rates. But then, given how high rates were before, they probably already are.