As a baseline scenario, 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 by early 2025. Here's where mortgage rates are headed for the rest of the year and how that will impact the housing market as a whole.
After its December 2023 session, the Fed forecasted it would make three quarter-point cuts by the end of 2024 to lower the benchmark rate to 4.6%. Prices have started to come down, but the group has signaled it wants to see more positive data before pulling the trigger.
Projected Interest Rates in the Next Five Years
ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.
Other Forecasts on Interest Rates
One outlook is offered by Trading Economics, a platform specializing in economic data and analysis. According to their predictions based on recent data, Trading Economics anticipates the interest rate to descend to 4.25% in 2024 and 3.25% in 2025.
Sure, mortgage rates could fall to 3% at some point, but chances are that's not going to happen anytime soon. Moreover, waiting for rates to drop before you buy your home could backfire. Instead, consider buying your house now and refinancing your mortgage when rates improve.
Mortgage rate predictions 2024
The MBA's forecast suggests that 30-year mortgage rates will fall into the 6.1% to 6.9% range in 2024, and NAR's forecast is very similar, predicting that rates will remain in the 6.1% to 6.8% range.
The latest Monetary Policy report says rates are expected to remain around 5.25% until autumn 2024 and then decline gradually to 4.25% by the end of 2026. The future of interest rates depends significantly on how quickly inflation drops – while wage growth and unemployment also play a factor.
Mortgage rates are going to stay above 6% through 2025, according to estimates from Goldman Sachs. Goldman said the decline in mortgage rates should offer marginal improvements in housing affordability. The average 30-year mortgage rate fell to 6.62% last week after hitting a cycle-high of 7.8%.
The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.
As a baseline scenario, 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 by early 2025.
Current mortgage interest rate trends
The average 15-year fixed mortgage rate similarly fell, going from 5.96% to 5.94%. After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 23-year high in 2023. Many experts and industry authorities believe they will follow a downward trajectory into 2024.
The current mortgage interest rates forecast is for rates to continue going down. After spiking to 7.79% last October, rates finally began to drop — managing a 1.19 percentage point decline in just 12 weeks. While there are no guarantees, our market expert recommends cautious optimism as we move through 2024.
Mortgage Bankers Association (MBA).
MBA's baseline forecast is for mortgage rates to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.
Many forecasters expect rates to remain well under 7 percent this year. McBride expects them to drop all the way to 5.75 percent by the end of 2024. “Inflation has been coming down — and coming down faster than expected in recent months — which bodes well for mortgage rates,” says McBride.
Heading into 2024, the Federal Reserve decided to maintain the target range for the federal funds rate at 5.25% to 5.50% and indicated that it may lower rates in the near future. Despite this prediction, you could still find high-yield savings accounts offering interest rates as high as 5.50% APY by the end of 2023.
By 2025 through 2028, given the large run-up from 2021 through 2023, home prices are predicted to rise more gradually at about a percentage point above the rate of inflation, for an estimated increase of 13% to 14% from 2023 levels.
Changes to Interest Rate Projections
In the December report, CBO estimates that the federal funds rate will average 5.3 percent in the fourth quarter of 2023 before falling to 3.7 percent by the end of 2025.
Meanwhile, the latest forecast from the National Association of Home Builders puts interest rates at 6.89% to finish 2023 in its October predictions. The organization says that the 30-year fixed rate will be 6.79% in 2024 and 5.72% in 2025.
According to their latest forecast for 30-year mortgage rates in October 2023, they expect them to range from 7.40% to 7.86%, with an average of 7.63%. They also predict that mortgage rates will peak at 9.41% in May 2024, before gradually declining to 3.67% by November 2027.
The average two-year fixed rate mortgage is currently 5.93 per cent, according to Moneyfacts. That compares to 5.54 per cent for five-year fixes. Those with the biggest deposits or with larger equity stakes in their home can also do much better when fixing for five years, rather than two years.
With inflation now decelerating, the Fed is positioning itself to make its first interest rate cut, though that may still be several months away. While mortgage forecasters base their projections on different data, most experts and market watchers predict rates will move toward 6% or lower by the end of 2024.
Mortgage rates change all the time. So a good mortgage rate could look drastically different from one day to the next. Right now, good mortgage rates for a 15-year fixed loan generally start in the high-5% range, while good rates for a 30-year mortgage typically start in the mid-6% range.
Legally, there isn't a limit on how many times you can refinance your home loan. However, mortgage lenders do have a few mortgage refinance requirements you'll need to meet each time you apply for a loan, and some special considerations are important to note if you want a cash-out refinance.
Based on recent data, Trading Economics predicts a rise to 5% in 2023 before falling back down to 4.25% in 2024 and 3.25% in 2025.