Mortgagerateslocal.com – Are you looking for a way to save money on your mortgage? Do you want to know what the future holds for the mortgage rates in 2024? Are you curious about how the economy, the inflation, and the Federal Reserve will affect your borrowing costs? If you answered yes to any of these questions, then you’ve come to the right place.
We’ll provide you with the latest information, insights, and predictions about the mortgage rate forecast for 2024. We’ll explain what the mortgage rates are, how they are determined, and what factors influence them. We’ll also share with you the current mortgage rate trends, the economic outlook for 2024, and the expert opinions on the future of the mortgage market.
By reading this article, you’ll learn what the mortgage rates will be like in 2024, how they will impact your monthly payments and your overall borrowing costs, and how you can get the best mortgage rate possible for your situation. You’ll also discover some tips and tools that will help you make an informed and smart decision about your mortgage.
Whether you’re planning to buy a new home, refinance your existing mortgage, or simply stay on top of the market trends, this article will provide you with valuable and actionable information that you can use to your advantage. So, without further ado, let’s dive into the mortgage rate forecast for 2024.
Current Mortgage Rate Trends
As of October 11, 2023, the average 30-year fixed-rate mortgage in the US is 7.83%, according to Bankrate. This is the highest level since 2000, when the average rate was 8.05%. The 15-year fixed-rate mortgage is also at a 20-year high, averaging 6.75%. The 5/1 adjustable-rate mortgage (ARM) is slightly lower, averaging 6.25%.
The mortgage rates have been rising steadily since the beginning of 2022, when they were at historic lows. In January 2022, the average 30-year fixed-rate mortgage was 2.65%, the lowest on record since 1971, according to Freddie Mac. The 15-year fixed-rate mortgage was also at a record low of 2.16%, and the 5/1 ARM was 2.75%.
The main reason for the increase in mortgage rates is the rise in inflation, which has been higher than expected due to the economic recovery from the pandemic, the supply chain disruptions, the labor shortages, and the fiscal stimulus. Inflation erodes the value of money over time, so lenders demand higher interest rates to compensate for the loss of purchasing power.
To combat inflation, the Federal Reserve has been tightening its monetary policy, which affects the short-term interest rates in the economy. The Fed has raised its benchmark federal funds rate four times in 2022 and twice in 2023, bringing it to 1.75%. The Fed has also started to taper its bond-buying program, which was aimed at keeping the long-term interest rates low and supporting the financial markets.
The Fed’s actions have a direct impact on the mortgage rates, especially the ARM rates, which are tied to the short-term rates. The fixed-rate mortgages are also influenced by the Fed’s policy, but they also depend on the long-term bond yields, such as the 10-year Treasury yield, which reflect the market’s expectations of future inflation and economic growth.
Mortgage Rate Forecast for 2024
Given the current trends and the Fed’s outlook, what can we expect for the mortgage rate forecast in 2024? Well, there is no definitive answer, as different sources and experts have different opinions and assumptions. However, we can look at some of the forecasts and scenarios from various reputable sources and see what they suggest.
Fannie Mae
Fannie Mae is a government-sponsored enterprise that provides liquidity and stability to the mortgage market by buying and securitizing mortgages from lenders. Fannie Mae publishes a monthly economic and housing outlook, which includes projections for the mortgage rates.
According to the latest outlook from September 2023, Fannie Mae expects the 30-year fixed-rate mortgage to average 8.1% in 2024, up from 7.4% in 2023. The 15-year fixed-rate mortgage is projected to average 7.1% in 2024, up from 6.4% in 2023. The 5/1 ARM is forecasted to average 6.6% in 2024, mortgage rate forecast up from 6.1% in 2023.
Fannie Mae’s projections are based on the assumption that the Fed will continue to raise its federal funds rate by 25 basis points every quarter in 2024, reaching 2.75% by the end of the year. The 10-year Treasury yield is expected to rise to 3.1% by the end of 2024, mortgage rate forecast up from 2.4% at the end of 2023.
Freddie Mac
Freddie Mac is another government-sponsored enterprise that operates in the mortgage market, similar to Fannie Mae. Freddie Mac also publishes a monthly outlook, which includes forecasts for the mortgage rates.
According to the latest outlook from October 2023, Freddie Mac expects the 30-year fixed-rate mortgage to average 7.9% in 2024, mortgage rate forecast up from 7.3% in 2023. The 15-year fixed-rate mortgage is projected to average 6.9% in 2024, up from 6.3% in 2023. The 5/1 ARM is forecasted to average 6.4% in 2024, mortgage rate forecast up from 5.9% in 2023.
Freddie Mac’s projections are based on the assumption that the Fed will raise its federal funds rate three times in 2024, reaching 2.5% by the end of the year. The 10-year Treasury yield is expected to rise to 2.9% by the end of 2024, up from 2.3% at the end of 2023.
Mortgage Bankers Association Mortgage Rate Forecast
The Mortgage Bankers Association (MBA) is a national trade association that represents the mortgage industry and provides research and analysis on the mortgage market. The MBA publishes a monthly mortgage finance forecast, which includes predictions for the mortgage rates.
According to the latest forecast from October 2023, the MBA expects the 30-year fixed-rate mortgage to average 8.2% in 2024, up from 7.5% in 2023. The 15-year fixed-rate mortgage is projected to average 7.3% in 2024, up from 6.6% in 2023. The 5/1 ARM is forecasted to average 6.8% in 2024, up from 6.2% in 2023.
The MBA’s forecasts are based on the assumption that the Fed will raise its federal funds rate four times in 2024, mortgage rate forecast reaching 2.75% by the end of the year. The 10-year Treasury yield is expected to rise to 3.2% by the end of 2024, up from 2.5% at the end of 2023.
National Association of Realtors
The National Association of Realtors (NAR) is a trade association that represents the real estate industry and provides data and insights on the housing market. The NAR publishes a monthly housing and economic outlook, which includes estimates for the mortgage rates.
According to the latest outlook from October 2023, the NAR expects the 30-year fixed-rate mortgage to average 6.0% in 2024, down from 7.0% in 2023. The 15-year fixed-rate mortgage is projected to average 5.2% in 2024, down from 6.2% in 2023. The 5/1 ARM is forecasted to average 5.6% in 2024, down from 6.6% in 2023.
The NAR’s estimates are based on the assumption that the Fed will lower its federal funds rate by 25 basis points in the second half of 2024, reaching 2.25% by the end of the year. The 10-year Treasury yield is expected to fall to 2.4% by the end of 2024, down from 2.6% at the end of 2023.
Factors That Affect the Mortgage Rates
As you can see, there is a wide range of predictions for the mortgage rates in 2024, depending on the source and the assumptions. However, they all agree that the mortgage rates are influenced by several factors, such as:
- The Federal Reserve’s monetary policy: The Fed’s decisions on the federal funds rate and the bond-buying program have a direct and indirect impact on the mortgage rates, as they affect the supply and demand of money in the economy, the inflation expectations, and the risk appetite of the investors.
- The inflation rate: The inflation rate measures the change in the prices of goods and services over time, which affects the value of money and the purchasing power of the consumers. Higher inflation leads to higher interest rates, as lenders demand more compensation for the loss of value of their money. Lower inflation leads to lower interest rates, as lenders are willing to accept lower returns for their money.
- The economic growth: The economic growth measures the change in the output of goods and services in the economy, which reflects the level of income and spending of the consumers and businesses. Higher economic growth leads to higher interest rates, as the demand for money and credit increases, and the inflationary pressures rise. Lower economic growth leads to lower interest rates, as the demand for money and credit decreases, and the inflationary pressures ease.
- The bond market: The bond market is where the investors buy and sell debt securities, such as Treasury bonds, corporate bonds, and mortgage-backed securities. The bond market affects the mortgage rates, as the mortgage rates are closely related to the yields on the long-term bonds, especially the 10-year Treasury yield. The bond yields reflect the market’s expectations of future inflation, economic growth, and risk. Higher bond yields lead to higher mortgage rates, as the lenders have to compete with the bond market for the investors’ money. Lower bond yields lead to lower mortgage rates, as the lenders can offer lower rates and still attract the investors’ money.
- Housing market: The housing market is the market where buyers and sellers exchange residential properties, such as houses, apartments, and condos. The housing market affects the mortgage rates, as mortgages are the main source of financing for home purchases. The housing market is influenced by the supply and demand of homes, the income and preferences of buyers and sellers, the availability and cost of credit, and the government policies and regulations.
Tips to Help You Get the Best Mortgage Rate in 2024
If you’re planning to buy a home or refinance your existing mortgage in 2024, you might be wondering how you can get the best mortgage rate possible. Here are some tips and tools to help you achieve that goal:
- Shop around. One of the best ways to get a low mortgage rate is to compare offers from multiple lenders.
- Improve your credit score. Another important factor that affects your mortgage rate is your credit score. The higher your credit score, the lower your interest rate. You can improve your credit score by paying your bills on time, keeping your credit card balances low, and avoiding new debt.
- Save for a down payment. The more money you put down on your home purchase, the lower your mortgage rate. A larger down payment reduces the lender’s risk and shows your financial commitment. Ideally, you should aim for a 20% down payment, which will also help you avoid paying private mortgage insurance (PMI).
- Choose the right loan term. The length of your mortgage loan also affects your interest rate. Generally, shorter-term loans, such as 15-year mortgages, have lower rates than longer-term loans, such as 30-year mortgages. However, shorter-term loans also have higher monthly payments, which might not fit your budget. You should choose the loan term that best suits your financial situation and goals.
Conclusion
Mortgage rates are expected to start 2024 at a high level, but then gradually decline throughout the year. However, the exact trajectory of the rates will depend on the economic conditions and the Fed’s actions. If you’re planning to buy a home or refinance your existing mortgage in 2024, you should shop around, improve your credit score, save for a down payment, and choose the right loan term to get the best mortgage rate possible.
