FINANCE
Will mortgage rates fall in 2024? This is what experts have to say
After nearly 18 months of increasing mortgage rates, three consecutive interest rate pauses have opened the door for a reduction in sky-high mortgages.
During the second half of 2022 and most of 2023, the Federal Reserve consistently raised the central bank’s interest rates. Currently, they are targeted between 5.25% to 5.5%, having been a tiny 0.25% during the covid-19 pandemic.
The outcome has been as expected on most fronts; higher interest rates make borrowing more expensive, company debt becomes less manageable, and workers foot the bill by being fired to make cuts. This reduction in business and personal spending power then slows price increases as everyone has less to spend.
There is a careful balancing act to be made between slowing the economy and not pushing it into a full-blown recession. So far, this balance has been struck, despite hundreds of thousands of job cuts in various sectors. With inflation close to the Fed’s 2% target, whispers fill the bank’s halls of when this 5.25% to 5.5% rate will be cut.
For home-owners and prospective home-buyers this interest rate is crucial. Buy-and-large, high interest rates mean high mortgage rates, making the debt taken out to buy a home more expensive than it was even 18 months ago. Currently, the average rate on a 30-year fixed rate mortgage is 7.13%. They peaked at 7.57%.
With the key interest rate marker set to decrease over the next year, it is very likely mortgage rates will decrease too.
What do experts think will happen with mortgage rates in 2024?
Experts expect interest rates to fall into the 6% territory through 2024.
“Regarding the volatile future of mortgage rates, there are several indicators that suggest a fall to 6% in 2024 is the most realistic prediction,” said Dave Forehand, the owner of Team Forehand Realty.
“I predict mortgage rates will go down [after the middle of the year] to the low to mid-sixes”, said Aaron Gordon, a senior mortgage loan officer at Guild Mortgage.
Federal Reserve interest rates are not the only factor affecting mortgage rates as other economic measures are taken into account too. However, should they be reduced as expected then mortgage rates should follow.
This doesn’t mean homes are suddenly going to become affordable, however.
“We’re expecting home price appreciation to stay flat for the next year nationally, so prices aren’t really going to move much from where they’re at now,” said Nicole Bachaud, a senior economist at Zillow.