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.
Mortgage rates are currently expected to continue trending down through 2024 and into 2025. The Mortgage Bankers Association thinks that 30-year mortgage rates could fall to 5.5% in 2025.
If inflation falls significantly and the economy enters a deep recession, it is possible that mortgage rates could fall back to 3%. However, this scenario is considered unlikely by most economists.
Inflation has been up in some categories and made rates move more upward than downward. Rates came down at the end of 2023 but the most recent Fed meeting should sign that there won't be any rate cuts until summer 2024.
Analysts with Fannie Mae and the Mortgage Bankers Association (MBA) both project that rates will fall going into 2024 and throughout next year. Fannie Mae economists expect rates to drop more quickly, falling below 6% by Q4 2024. Meanwhile, the MBA's forecast for Q4 2024 is 6.1% and 5.9% for Q1 2025.
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%.
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 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.
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.
Will the Federal Reserve lower interest rates? It's a matter of when, not if, according to the central bank. But the Fed has indicated that consumers shouldn't expect any cuts until at least the spring. To combat ongoing inflation, it raised the federal funds rate 11 times between March 2022 and July 2023.
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.
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 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.
Home Supply Remains Tight
The Bank of America report found that 80% of current U.S. mortgages carry an interest rate of 5% or lower. With current 30-year mortgage rates averaging more than 7%, having a 5% mortgage is a big incentive for homeowners to stay put.
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. Previously, Goldman had expected the 30-year mortgage rate to be at 7.1% by the end of 2024 and at 6.6% by the end of 2025.
In December, Fed officials indicated that they envisioned three rate cuts in 2024, reducing their benchmark rate to about 4.6% by year's end.
Fannie Mae expects mortgage rates to decline gradually over the next two years, reaching 6.9% for the 30-year mortgage by 2025. The slow decline in rates is expected to trigger a modest rebound in home sales, according to its latest economic forecast report.
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.
Because higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall. Similarly, to combat the rising inflation in 2022, the Fed has been increasing rates throughout the year.
When inflation is running high, the Fed raises those short-term rates to slow the economy and reduce pressure on prices. But higher interest rates make it more expensive for banks to borrow, so they raise their rates on consumer loans, including mortgages, to compensate.
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.
We forecast PCE inflation to slow to 2.0% y/y by Q4 2024—much earlier than the Fed's estimate. Importantly, the SEP projects that the Federal Funds rate will fall to 4.6% in 2024, 3.6% in 2025, and 2.9% in 2026.
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%.