The National Association of Realtors expects mortgage rates will average 6.8% in the first quarter of 2024, dropping to 6.6% in the second quarter, according to its latest Quarterly U.S. Economic Forecast. The trade association predicts that rates will continue to fall to 6.1% by the end of the year.
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.
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.
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.
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%.
While the shift in monetary policy has spurred a sharp drop mortgage rates this quarter, Fannie Mae noted a limit to how far these rates will fall: it projects that the 30-year fixed rate will average 6.7% in 2024, before falling to 6.2% in 2025.
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.
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.
What is clear is that mortgage rates will continue to drop in the New Year and home prices will recover by 2025, according to Fannie Mae. Fannie Mae expects mortgage rates to decline gradually over the next two years, reaching 6.9% for the 30-year mortgage by 2025.
Month-over-month declines in home prices; moderate year-over-year appreciation. The US housing market witnessed explosive price growth in 2022, but experts predict a shift towards stabilization and moderate appreciation in 2024 and 2025.
Projected Mortgage Interest Rate Forecast 2025
Monthly variations are expected, culminating in a year-end rate of 6.54%, reflecting an overall decline from the initial point.
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.
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.
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.
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.
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.
Freddie Mac, Fannie Mae and Mortgage Bankers Association
In its November 2023 Mortgage Finance Forecast, the Mortgage Bankers Association (MBA) anticipates 30-year rates starting in 2024 at 7.1% and gradually declining to 6.1% at the close of the year before dipping as low as 5.5% in 2025.
Considering these factors, a conservative prediction for 30-year fixed mortgage rates by 2025 could be in the range of 5.5% to 7%. This estimate accounts for potential economic growth, the Federal Reserve's likely monetary policy responses, global market influences, and real estate market conditions.
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.
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.”
Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance. Using a mortgage calculator is a good resource to budget some of the costs.
Mortgage rates aren't generally expected to drop below 6% in 2024, though they are likely to decline gradually as the Federal Reserve starts making interest-rate cuts. The Fed held interest rates steady Wednesday, but some economists say cuts could begin this spring.
Ultimately, we expect growth in mortgage originations, including some improvement in the refinance segment. We forecast 2024 total single-family mortgage originations to be $1.98 trillion in 2024 and $2.44 trillion in 2025, up from $1.50 trillion in 2023.