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.
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%.
The Commonwealth Bank forecasts rates could fall to 2.85 per cent in June 2025. Westpac forecasts they will drop to 3.10 per cent in September next year, while NAB believes they will fall to 3.10 per cent in December 2025.
But we expect the Fed will begin cutting rates in March 2024—bringing the federal-funds rate to 3.75%–4.00% by the end of 2024. We expect the Fed to continue cutting until early 2026, ultimately bringing the federal-funds rate down by over 300 basis points.
Experts still predict mortgage rates will drop to the low-6% range by the end of 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.
Inflation and Fed hikes have pushed mortgage rates up to a 20-year high. 30-year mortgage rates are currently expected to fall to somewhere between 5.8% and 6.1% in 2024. Instead of waiting for rates to drop, homebuyers should consider buying now and refinancing later to avoid increased competition next year.
An interest rate forecast by Trading Economics, as of 12 May, predicted that the Fed Funds Rate could hit 5.25% by the end of this quarter - a forecast that has been materialised. The rate is then predicted to fall back to 3.75% in 2024 and 3.25% in 2025, according to our econometric models.
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.
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 latest yield curve from the BoE forecasts a cut in interest rates in quarter 2 of this year. But it's clear this higher for longer interest rate environment is here to stay. Data shows interest rates will remain above 3% well into 2027.
Last year, the White House projection for bill rates in 2030 was 2.4%. Such a level would be much higher than has been typical since the turn of the century. Three-month bill rates averaged around 1.5% over that period.
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.
Over that same period, the interest rate on 10-year Treasury notes is projected to rise gradually, reaching 3.1 percent in 2030 (see Chapter 2).
Make sure that you're comfortable with the cost and how your APR may be affected. Also, ask how long a lock will last. Rate locks often last 15 – 60 days, but the exact time frame can vary based on the lender. You should choose a time frame that's long enough to move your loan through the underwriting process.
In its January Mortgage Finance Forecast, the Mortgage Bankers Association predicts that mortgage rates will fall from 6.9% in the first quarter of 2024 to 6.1% by the fourth quarter. The industry group expects rates will fall below the 6% threshold in the first quarter of 2025.
Lucky for buyers, most economists project that mortgage rates will decline in 2024—but only by a modest amount. Should those predictions ring true, the question is when—and will it be enough to shift housing affordability in the right direction?
2021: The lowest 30-year mortgage rates ever
Rates plummeted in 2020 and 2021 in response to the Coronavirus pandemic. By July 2020, the 30-year fixed rate fell below 3% for the first time. And it kept falling to a new record low of just 2.65% in January 2021. The average mortgage rate for that year was 2.96%.
Our Chart of the Day is from Goldman Sachs, which plots the firm's expectation that the 30-year mortgage rate will stay above 6% through 2025. Goldman said it expects 30-year mortgage rates will drop to 6.3% by the end of 2024, and fall slightly in 2025 to 6% as the Fed starts to cut interest rates.
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.
McBride shares that while the high-rate environment will persist, rates will ease for most borrowers in 2024. Increased competition between lenders may help drivers secure a good rate. However, he warns, “don't expect auto loan rates to fall enough to offset the increases we've seen over the past couple of years.”
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.
The U.S. Federal Reserve is currently expected to cut interest rates by a little more than 1% over the course of its seven remaining scheduled meetings of 2024. This may leave short-term interest rates at approximately 4% by December 2024, based on market forecasts.
Why are mortgage rates so high? The recent surge in mortgage rates results from several factors, most significantly the Federal Reserve's policy of increasing short-term interest rates. Hiking interest rates has long been the Fed's primary tool for battling high inflation.