Mortgage interest rate forecast: What experts predict for this year and 2024 (2024)

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MoneyWatch: Managing Your Money

By Tim Maxwell

Edited By Angelica Leicht

/ CBS News

Mortgage interest rate forecast: What experts predict for this year and 2024 (2)

The Federal Reserve raised interest rates by 0.25% in late July after a brief pause in June, boosting the target range to a rate of 5.25% to 5.5%. That hike, part of an effort to curb persistent inflation, was one of 11 rate increases by the Fed since March 2022.

Mortgage interest rates have continued to climb in turn, with the average 30-year fixed-rate mortgage rate at 7.53% as of September 1, 2023. That average rate is about 2% higher than it was the same time last year — and represents the highest average mortgage rate in over 20 years.

Thanks to the elevated mortgage rates, homes are now less affordable for homebuyers. And, the higher rates also make refinancing a less attractive option for current homeowners, as many homeowners currently have mortgages with rates that are lower than what's being offered now.

But what can we expect for mortgage rates going forward? Here's what several housing market experts anticipate for mortgage interest rates through the remainder of 2023 and into 2024.

Explore the rates you could get on a mortgage loan here now.

Mortgage interest rate forecast: What experts predict for this year and 2024

While experts acknowledge several factors are influencing mortgage rates, from treasury yields to the 2024 election, most agree that what happens with inflation will play a key role in the direction of mortgage rates. Here's what they had to say.

Selma Hepp, chief economist at CoreLogic, a real estate data and analytics firm

"As people run out of their savings left over from the pandemic, spending will begin to slow, and the economy will begin to slow as well. Also, gas prices are rising along with food prices, which will impact household spending — something the Fed pays very close attention to. At some point in the first quarter or second quarter of 2024, the Fed will need to offer relief to these households by cutting rates to lower the cost of borrowing. However, expect elevated mortgage rates to finish the year between 6.5% to 6.8%."

Mike Hardy, managing partner at Churchill Mortgage

"Looking into the crystal ball, I see mortgage rates heading down over the next six to 12 months, with some volatility accompanying this downward trend. I think 30-year rates will be in the ballpark of 5.25% and 15-year rates to be around 4.875% a year from now."

Jack Macdowell, co-founder and CIO at Palisades Group, an asset management firm

"While the dispersion of outcomes is wide, our base case assumes mortgage rates will be tighter by 25 to 50 basis points by the end of the first quarter 2024. This would put the 30-year fixed rate mortgage around 7%."

Ralph DiBugnara, founder of Home Qualified

"I do believe — outside of the 2020 and 2021 boom — we are back to some normal buying, selling and refinancing cycles, although they are slower because of the raise in rates and lack of homes for sale. The 30-year and 15-year fixed, I believe, will average around 7% and 6.375% during the first quarter of 2024."

Craig Martin, executive managing director at J.D. Power

"Barring any extreme market shocks, we'd expect interest rates to remain at similar levels to where they are at today for the next six to 12 months."

Learn the mortgage loan rates you may qualify for here now.

Alternatives to mortgage loans

In today's high-rate environment, buying a new home can be challenging, and refinancing may not make sense if your current mortgage has a lower rate. However, it may still make sense to buy at a higher rate if the perfect home comes along, provided the monthly payment fits easily into your budget.

While rates may be above 7% right now, a mortgage loan can be refinanced to a lower rate if mortgage rates drop in the future. However, the perfect home may not come around again, so it can make sense to take out a mortgage loan now and start building equity.

And, if you've been in your home awhile, you may have sufficient home equity you can tap into to consolidate high-interest debt, fund a home renovation project or cover other expenses. One option is ahome equity loan, which is a fixed-rate loan that allows you to borrow money against the equity in your home. Another is a home equity line of credit (HELOC), which is a revolving line of credit with variable interest rates that work much like a credit card. A HELOC lets you draw funds up to your established limit as needed.

Home equity loans and HELOCs often come with interest rates that are lower than those for personal loans or credit cards. As of August 21, the average home equity loan and HELOC interest rates were 8.57% and 8.80%, respectively. These rates are lower than the average 24-month personal loan rate of 11.48% — and considerably less than the average credit card interest rate of 22.16%, per the most recent Federal Reserve data.

If you're a homeowner who needs cash but doesn't want to refinance their lower-rate mortgage, a home equity loan or HELOC enables you to leverage your home's value without impacting your current mortgage. Remember, though, that both home equity loans and HELOCs are secured by your house; this means your home is at stake if you default on the loan.

The bottom line

While keeping a close eye on interest rate trends can help you navigate the housing market, be aware that rate fluctuations can be unpredictable. It's generally wise to base financing decisions on how well they fit within your overall financial plan, long-term goals and unique financial needs.

Regardless of current mortgage rates, you can typically obtain a lower mortgage interest rate by taking steps such as buying points upfront, improving your credit score or making a larger down payment on the home. Keep in mind, even a one-point reduction in mortgage rates could save you thousands of dollars over the life of the loan.

Mortgage interest rate forecast: What experts predict for this year and 2024 (2024)

FAQs

Mortgage interest rate forecast: What experts predict for this year and 2024? ›

Mortgage rate prediction FAQs

What is the mortgage rate prediction for 2024? ›

Mortgage rates are expected to go down throughout the rest of 2024. Depending on which forecast you look at for housing market predictions in 2024, 30-year mortgage rates could end up between 6.6% and 6.7% by the end of the year.

What is the interest prediction for 2024? ›

On 30 May 2024, the average 2 year fixed mortgage rate is 5.80%. While this is a significant drop from its July 2023 peak of 6.86%, it's still much higher than December 2021 when was 2.34%. Find out more in our guide to the Best mortgage rates.

What is the mortgage rate forecast for the next 5 years? ›

Trading Economics offers a more optimistic outlook, predicting a rise to 5% in 2023 before falling to 4.25% in 2024 and 3.25% in 2025. This forecast is supported by Morningstar's analysis, which projects rates between 3.75% and 4%.

What is the interest rate forecast for 2025? ›

To quote the July 19 Freddie Mac mortgage forecast report:

Looking beyond that, Freddie Mac's researchers said that they expect mortgage rates to decline even further in 2025, dropping below 6.5% on average.

Will federal interest rates go down in 2024? ›

In June, the consumer price index fell to 3%, the lowest it's been in over three years. At that point, the Fed projected the fed funds rate would be cut to 5.1% by the end of 2024. The CME Group's FedWatch tool, which measures the probability of a rate adjustment, has predicted the first cut will come in September.

What are CD rates expected to do in 2024? ›

Key takeaways. The national average rate for one-year CD rates will be at 1.15 percent APY by the end of 2024, McBride forecasts, while predicting top-yielding one-year CDs to pay a significantly higher rate of 4.25 percent APY at that time.

Will mortgage rates ever be 3% again? ›

In summary, it is unlikely that mortgage rates in the US will ever reach 3% again, at least not in the foreseeable future. This is due to a combination of factors, including: Higher Inflation: Inflation is currently at a 40-year high in the US, and the Federal Reserve is raising interest rates to combat it.

Where will mortgage rates be in 2026? ›

Predicted Range for Mortgage Rates

Many experts anticipate rates could hover between 4.5% and 5.5% by the end of 2026. For instance, predictions from Long Forecast indicate a likely mortgage rate average of around 4.75%, with the minimum expected to be approximately 4.61%.

What is a good mortgage rate? ›

Today's national mortgage interest rate trends

If you're looking to refinance your current mortgage, the national 30-year fixed refinance interest rate is 6.89%, up 1 basis point over the last seven days. Meanwhile, the average 15-year fixed refinance interest rate is 6.34%, remaining stable over the last seven days.

What is the market prediction for 2024? ›

The forecast predicts a substantial jump of 22.9% in existing single-family home sales compared to 2023. This translates to an estimated 327,100 units sold in 2024, a significant increase from the projected 266,200 units in 2023. California's median home price is anticipated to climb by 6.2% to $860,300 in 2024.

Should I lock my mortgage rate today? ›

Locking in early can help you get what you were budgeting for from the start. As long as you close before your rate lock expires, any increase in rates won't affect you. The ideal time to lock your mortgage rate is when interest rates are at their lowest, but this is hard to predict — even for the experts.

How much does it cost to buy down interest rates? ›

This practice is often referred to as “buying down the interest rate” or a “buydown.” Each point the borrower buys costs 1 percent of the mortgage amount. One point on a $400,000 mortgage would cost $4,000, for example. In effect, mortgage points are a type of prepaid interest.

What will the mortgage rate be in late 2024? ›

NAR expects the 30-year fixed mortgage rate to average 6.9% in its most recent quarterly forecast published in June, an increase from its previous forecast of 6.7%. The professional real estate organization also revised its forecast upward for Q4 to 6.5% to 6.7% by the end of 2024.

What will the rate be in 2026? ›

The market-implied path for base rate in May's Bank of England's Monetary Policy Report is that it will fall from 5.25 per cent to around 3.75 per cent by the end of 2026. It's worth pointing out that this forecast has risen by 0.7 percentage points on average, compared with the equivalent period in February's report.

What is the recession prediction for 2025? ›

He predicted that the fallout from this crisis could surpass the impact of the Great Recession of 2008-2009, with potential declines of up to 86 per cent in the S&P and 92 per cent in the Nasdaq sometime in 2025.

Will mortgage rates go down in 2027? ›

Will mortgage rates come down in the next 5 years? Lord: “For the rest of 2023, I predict rates for the 30-year fixed-rate mortgage will average 7.3%, followed by 6.1% in 2024, 5.5% in 2025, 5% in 2026, 4.5% in 2027, and 4.5% in 2028.

Will auto interest rates go down in 2024? ›

Auto loan rates for new and used vehicle purchases fell in the first quarter of 2024 to 6.73% and 11.91%, respectively, down slightly from the 15-year highs we saw at the end of 2023, according to Experian.

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