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.
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.
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.
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%.
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 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.
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.
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.
Experts still predict mortgage rates will drop to the low-6% range 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.
During a traditional recession, mortgage rates typically drop. Home prices can drop as well, with fewer qualified buyers and less competition for homes. However, there are still plenty of risks during any economic downturn, and today's high-rate climate is not exactly traditional.
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.
Today's national 30-year mortgage interest rate trends
For today, Monday, February 12, 2024, the current average interest rate for a 30-year fixed mortgage is 7.16%, up 10 basis points from a week ago.
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.
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 ESR Group expects mortgage rates to decline in 2024, ending the year below 6 percent. The lower rate environment is expected to boost refinance volumes, which are already on the upswing, as evidenced by the recent uptick in Fannie Mae's Refinance Application-Level Index, to nearly double their 2023 levels in 2024.
Projected Mortgage Interest Rate Forecast 2025
Overview: Predictions for 30-year mortgage rates in 2025 suggest a fluctuating pattern, starting at 7.66%-8.29% in January. Monthly variations are expected, culminating in a year-end rate of 6.54%, reflecting an overall decline from the initial point.
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.
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.
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.
If the news of a potential recession worries you, it's likely best to wait, particularly if your main income source is susceptible to an economic downturn. Just like you can't time success in the stock market, trying to time the real estate market is just as futile.