Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Mortgage rates continue their descent, plunging to their lowest level this week since February 2023.
The average rate on the benchmark 30-year mortgage fell 15 basis points to 6.2% for the week ending Sept. 12, according to Freddie Mac data. A basis point is one one-hundredth of a percentage point.
This reading is over 150 basis points—or 1.5%—lower than the October 2023 high of 7.79%, which should come as welcome news for those hoping to purchase or refinance a home.
Still, despite this rosier rate picture and expectations that the Federal Reserve will finally cut its benchmark interest rate at its upcoming September meeting, many housing market experts don’t anticipate mortgage rates to recede enough in the coming months to make homeownership affordable for many would-be buyers.
Mortgage Rate Predictions for 2024 and 2025
Here’s how some experts predict market conditions will affect the average 30-year, fixed-rate mortgage in Q4 2024 and beyond:
loanDepot: Mortgage rates could fall below 6% in Q4
“Mortgage rates have already dropped to the mid-6% level following news that the Fed is expected to begin cutting rates at their September meeting, and they may continue to fall. However, any further drop will likely be limited until there is more certainty on rate cuts beyond an initial 25 basis points in September. By the end of the year, they may cut rates by 75-100 basis [points], which could bring mortgage rates to the high-5% to low-6% range,” says Jeff DerGurahian, chief investment officer and head economist at loanDepot.
BrightMLS: 30-Year, fixed rate to hover below 6.4% in Q4
“Rates will be bumping around over the next few weeks and should come down further as we head into fall,” Lisa Sturtevant, chief economist at BrightMLS, tells Forbes Advisor. “I’m expecting that average rates on a 30-year fixed-rate mortgage will still be between 6.2% and 6.4% by the fourth quarter.”
Fannie Mae: Rates will average 6.4% in Q4 and continue descending
Fannie Mae expects the average 30-year fixed mortgage rate will continue moving down at a modest pace into the next year, and the 30-year fixed rate will average 6.4% for the second quarter of 2024, followed by an average of 6.2% in Q1 2025.
Freddie Mac: Rates will remain elevated through 2024
In its August Economic, Housing and Mortgage Market Outlook forecast, Freddie Mac notes that in anticipation of an upcoming central bank-approved federal funds rate cut has already put downward pressure on mortgage rates. However, while a rate cut should prompt further easing, Freddie Mac expects mortgage rates to experience only gradual declines in the coming quarters.
Mortgage Bankers Association (MBA): Rates will average 6.5% in Q4
MBA expects the 30-year fixed-rate mortgage to decline throughout the rest of the year, averaging 6.5% in the fourth quarter, according to the real estate finance association’s July Mortgage Finance Forecast. MBA economists anticipate rates to continue trending downward next year, averaging 6.4% in the first quarter of 2025.
Palisades Group: Rates will stay above 6.25% through 2024
“The market has consistently overestimated the likelihood, timing, and quantity of the Federal Reserve’s rate cuts,” says managing member and chief investment officer Jack Macdowell. “Based on current data, it is hard to envision more than one to two cuts in 2024 and hard to see mortgage rates drop below 6.25%.”
HSH.com: 30-year fixed-rate mortgages will average between 6.6% and 6.9% through September
“Mortgage rates have moved lower in recent weeks amid growing expectation that the Fed will soon be lowering short-term rates,” says Keith Gumbinger, vice president at HSH.com, a mortgage website. “We’ll know more about their future direction after the September Fed meeting concludes.”
RE/MAX: Rates will be 6.6% at the end of the 1st quarter of 2025
“Economists predict that mortgage rates will remain elevated for most of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates,” Dave Liniger, co-founder of RE/MAX, tells Forbes Advisor. “Even then, rates are unlikely to return to the lows seen during the pandemic, with investors predicting just one or two rate reductions this year.”
Fed Signals September Rate Cut: How Much Will Mortgage Rates Drop?
The Federal Open Market Committee (FOMC) voted unanimously to leave the benchmark federal funds rate unchanged at its July two-day policy meeting. The federal funds rate is the overnight borrowing rate for commercial banks and credit unions and indirectly influences mortgage rates.
The decision marked the eighth consecutive meeting in which the FOMC has kept its policy rate steady between 5.25% and 5.5%.
Over the past two years, mortgage rates have soared to their highest levels in decades, fueled, in part, by the Fed’s aggressive interest rate policy actions to tame inflation.
However, many Fed watchers expect policymakers to finally start cutting rates at their September meeting, especially in light of Federal Reserve Chair Jerome Powell’s remarks at the Federal Reserve’s 2024 Jackson Hole symposium in August, signaling that a rate cut is imminent.
Still, despite this all-but-guaranteed cut, housing experts say don’t expect mortgage rates to drop significantly.
“[N]ot only has the market already priced in a 25 basis point cut at the Fed’s September meeting, but also 25 basis point cuts each in the November and December meetings,” said Ralph McLaughlin, senior economist at Realtor.com, in an emailed statement. “As such, we shouldn’t expect the downward movement in mortgage rates to accelerate unless worse-than-expected economic indicators suggest the market is headed for anything but a soft landing.
“Prospective home buyers expecting a big drop in mortgage rates after the Fed’s September meeting are going to be disappointed,” Sturtevant said.
In the meantime, Danielle Hale, chief economist at Realtor.com, says buyers can secure a lower mortgage rate by comparing lenders or shopping for homes with an assumable mortgage. An assumable mortgage is when a seller allows a buyer to take over an existing mortgage and (typically lower) rate.
Hale says this hack “can result in lower costs and make home buying possible even before mortgage rates trend more meaningfully lower.”
The next two-day FOMC meeting is September 17 and 18. Most Fed watchers expect policymakers to reduce the federal funds rate by 25 basis points, according to the CME FedWatch Tool, an online barometer that tracks market expectations for rate movements at upcoming FOMC meetings.
Refinance Now or Wait? What Experts Say About 2024 Vs. 2025
To evaluate whether or not a refinance would be realistic, you want to evaluate your reasoning. If the goal is debt consolidation, it could make sense, but if you're trying to reduce the payment, it could be more challenging to achieve in the current higher-rate environment. The only way to know for sure is to speak with a mortgage lender to explore your options.
— Jenn Bourque, loan officer at Empire Home Loans and Forbes Advisor advisory board member
Whether 2024 or 2025 will be a better time to refinance depends on several factors, including the number of times the Fed cuts interest rates this year and by how much. The mortgage rate you got when you financed your home is another major factor.
Over 40% of U.S. mortgages were originated in 2020 and 2021 when interest rates were at record lows. There were also some 14 million mortgage refinances during the same time. If you were lucky enough to secure a mortgage during that time, the remainder of 2024 and into the early months of 2025 may not be the ideal time to refinance.
“Right now, roughly two-thirds of Americans with a mortgage carry an interest rate below 4%,” DerGurahian tells Forbes Advisor. “Even with one or two possible rate cuts from the Fed in the second half of this year, rates will not drop below that point, making a refinance a tough sell.”
However, he notes that refinancing in 2024 could make sense for some.
“If you're holding a mortgage rate around or above 7%, you could see significant savings by refinancing this year,” DerGurahian says. “However, if your rate is 6.5% or lower, it might make sense to wait until 2025, as we're expecting rates to drop to the mid-5% range by mid-year.”
Experts believe that once the Fed cuts rates in 2024, refinance volume will improve as borrowers who took on high mortgage rates will jump at the chance to lower their monthly costs.
“For example, if you are holding a 6.5% rate on a $500,000 30-year fixed mortgage, you are likely paying around $3,160 per month, DerGurahian says. “If you refinance that at 5.5%, you would be paying around $2,840 per month, saving you approximately $320 monthly.”
Nonetheless, if you’re considering refinancing to lower your monthly payment, keep in mind that not all options yield less interest over the life of the loan.
“Remember that just because you can get a lower rate doesn’t mean you should immediately refinance,” Matt Vernon, head of retail lending at Bank of America, tells Forbes Advisor. “You may be paying a lower monthly mortgage, but you may have to also extend the life of your loan and refinancing could cost you more in interest.”
Current Mortgage Rate Trends
What Do Current Rates Mean for Refinancing in 2024?
Refinance volume soared compared to last year but was volatile week-to-week.
Here are recent trends in refinance activity, according to the MBA’s Weekly Mortgage Applications Survey.
| REFINANCE ACTIVITY | WEEKLY | ANNUALLY |
|---|---|---|
Week ending August 2 | +16% | +59% |
Week ending August 9 | +35% | +118% |
Week ending August 16 | -15% | +90% |
Week ending August 23 | -0.1% | +85% |
What a difference 50 to 75 basis points make. That’s roughly the range of how much lower the average 30-year-fixed interest rate was this August compared to a year ago.
Though rates are still high, housing market experts are optimistic that more borrowers will see more opportunities to refinance as mortgage rates decrease further in the coming months.
Refinance rates tend to be higher than purchase rates, but the two typically move in tandem, suggesting refinance activity could gain greater traction if rates continue their downward trend.
“I’ve heard from a lot of people who locked in over the course of the past eighteen months, when rates were at their peak, already asking whether it’s time to refinance and what savings they could have,” said Melissa Cohn, regional vice president at William Raveis Mortgage, in an emailed statement. “I think that the outlook is good, and hopefully that spills into the real estate market, and we get more buyers in the market.”
Meanwhile, many borrowers may wait until after the FOMC meeting in September to see if the outcome pushes mortgage rates lower.
Despite cooling, rates remain far above the historically low mortgage rates borrowers nabbed during the pandemic—and likely will for a while. Currently, over six out of 10 purchase and refinance loans are at rates below 4%, according to Freddie Mac.
Pro Tip
Refinancing your mortgage is often a great financial move if you can qualify for a rate lower than your current rate and shorten your loan term. However, make sure you'll remain in your home long enough to recoup the closing costs.
How To Get a Lower Mortgage Refinance Rate
The good news is that, despite elevated rates, there are methods you can employ to secure a lower rate. These methods might be especially beneficial if you bought a home between mid-October and early November 2022 or mid-August through early December 2023 when rates were over 7%.
Because there are closing costs and fees associated with refinancing, many mortgage experts say refinancing only makes sense if you can snag a rate that’s at least 1% lower than your current rate.
Here are some actions you can take to whittle down your refinance rate:
- Get rate quote estimates from at least three lenders
- Ask lenders about waiving or reducing closing costs
- Negotiate with your lender to match the best deal
- Take steps to strengthen your credit score
- Save for a larger down payment
- Choose a shorter-term loan
- Buy discount points
Mortgage Rate Predictions for the Next 5 Years
Cohn tells Forbes Advisor she hopes mortgage rates will hover in the 5% range next year but that the presidential election could factor into it.
“The fiscal policies of the new administration could be inflationary and keep rates higher than we hoped for," she says.
Nonetheless, Cohn maintains a positive long-term outlook.
“If inflation sticks at 2%, that will promote stable to lower rates over the next five years,” said Cohn.
Experts say housing inventory will play a critical role once rates descend enough to attract more buyers.
“When rates come down, we’re going to be in store for another hot housing market where there are more buyers than sellers jacking up prices because we haven’t solved the problem” of low inventory, says Daryl Fairweather, chief economist at Redfin. “It’s still that affordability problem. That’s going to stay with us.”
What Affects Mortgage Rates?
A complex set of factors impact mortgage interest rates, including broader economic conditions, the monetary actions of the Federal Reserve (to some extent) and inflation. However, long-term mortgage rates are directly impacted by the bond market. The rate you’re offered on a mortgage will also depend on the lender you work with, its business costs and your financial profile.
Demand for mortgages can also affect rates, pushing them higher as available capital for lending tightens. Conversely, when there’s less borrower demand—as we’re seeing now due to average interest rates hovering in the high 6% to low 7% range—lenders might consider offering more competitive rates or other incentives to attract borrowers.
How To Shop For the Best Mortgage Rate
Rather than waiting it out for a rate that they like better, hopeful homebuyers should assess their personal financial situation—if the house is right for them, and the upfront and monthly payments are affordable, it could be the right chance to make a move.
- Matt Vernon, head of retail lending, Bank of America
Getting an optimal rate on a home loan can save you a significant amount of money over time. Here are some tips that can help you get the best rate possible for your situation:
- Keep your eye on rates. Mortgage rates are constantly changing. Keeping a close watch will make it easier to find and lock in a better rate.
- Check your credit. When you apply for a mortgage, the lender will review your credit to determine your creditworthiness as well as your interest rate. In general, the higher your credit score, the better your rate will be. To get an idea of where you stand, check your credit before you apply and dispute any errors with the appropriate credit bureau to potentially boost your score.
- Shop around and compare lenders. Consider options from as many mortgage lenders as possible to find the best deal for you. Prospective buyers have saved more than $1,500 over a loan’s term by getting two quotes from lenders and saved roughly $3,000 when they sought five quotes, according to Freddie Mac.
Faster, easier mortgage lending
Check your rates today with Better Mortgage.
Frequently Asked Questions (FAQs)
What are mortgage rates?
Mortgage rates are the costs associated with taking out a loan to finance a home purchase. Because properties cost so much, most people can’t pay for them with cash, so they opt to stretch the payments over long periods of time, often as much as 30 years, to make the regular monthly payments more affordable.
When interest rates rise, reflecting changes in the economy and financial markets, so too do mortgage rates—and vice versa.
What is a mortgage rate lock?
A mortgage rate lock is a guarantee that the rate you’re offered in your mortgage application acceptance is the one you will eventually pay, assuming you close within a normal period of time and make no changes to your application.
In a period of rising or volatile interest rates—like the present one—it may be wise to lock in a rate that seems affordable for you.
When should I lock my mortgage rate?
It can be tricky to time any market, and mortgage rates are no exception. If conditions are choppy, and interest rates are likely to rise, it may be smart to lock in a rate that works with your budget and seems fair to you.
Be sure to ask your lender about the consequences of not closing within the timeframe specified in a rate lock agreement and also about what could happen if rates fall after you lock in a rate.
How do you calculate your mortgage payment?
Depending on your loan type and other factors, the components of a monthly payment can vary but typically include:
- Principal. The amount of funds you borrow from a lender for your mortgage.
- Interest. The cost the lender charges you for borrowing the funds.
- Property taxes. Payments are based on local property tax rates.
- Homeowners insurance. A separate policy for insurance coverage based on the value of your home and property.
- Private mortgage insurance (PMI). Typically only applies if you take out a conventional mortgage with a down payment below 20% of the purchase price.
- Homeowners association (HOA) or condominium fees. Only applies if your property is part of an HOA or you own a condominium.
- Escrow. An account reserved for property taxes, homeowners insurance and mortgage insurance, managed by the lender.
- Additional costs. Examples of potential additional costs include home warranties and flood insurance.
Along with the above information, plug in the home price, down payment, interest rate and loan term into a mortgage calculator to determine the most accurate monthly mortgage payment estimate.
Will mortgage rates go down in 2024?
Experts foresee an inevitable downward trend in mortgage rates, though it will likely be slow-going for the remainder of the year.
“For them to move much lower from here, we’ll need to see inflation settle a bit more and also see indications from the Fed that additional rate cuts may come later this year,” Gumbinger says.
What is the mortgage rate forecast for the next five years?
Given the many factors directly and indirectly impact mortgage rates, predicting where rates will go in the years ahead is tricky.
Crystal Sunbury, real estate senior analyst at RSM US forecasts mortgage rates dropping but doesn’t anticipate the return of the rock-bottom rates we saw in 2021 and 2022.
“Mortgage rates are likely to continue easing over the next few months, and likely end the year around 6.5% and be in the 6-6.5% range throughout 2025,” Sunbury tells Forbes Advisor, anticipating rates making their way down to the 5.5% to 6% range in late of 2025, and then remaining roughly in that range for the longer term.
