Will mortgage rates go down in 2024?

• Inflation and Fed hikes have pushed mortgage rates up to a 20-year high.
• 30-year mortgage rates are currently expected to fall to between 6.4% and 6.5% in 2024.
• Homebuyers might consider buying now and refinancing later to avoid increased competition when rates drop.

Good news for borrowers: The wait for lower rates may soon be over. As inflation slows and the economy cools off, mortgage rates should start trending down at some point this year.

Inflation has been somewhat sticky in recent months, but it’s generally expected to continue decelerating this year. This means the Federal Reserve may be able to start cutting the federal funds rate later in 2024. This would remove a lot of upward pressure off of mortgage rates.

The not-so-good news: Rates probably won’t go back to the historic lows we saw in 2020 and 2021. And once rates fall, homebuyers will likely have other challenges to contend with, including increased competition and rising home prices.

Will mortgage rates go down in 2024? Right now, it’s looking like they will, but there are some things homeowners and buyers should know. Check out our in-depth mortgage rate forecast for 2024.

Why are mortgage rates so high?

Like other consumer rates, mortgage rates are impacted in large part by what’s going on in the economy. Rates climbed in 2022 in response to rising inflation. To try to quell rising prices, the Fed started aggressively hiking the federal funds rate, which has also kept mortgage rates elevated.

Inflation has slowed significantly since it peaked in June 2022, when prices had risen 9.1% year over year, according to the Bureau of Labor Statistics. But in March 2024, the Consumer Price Index was up 3.5% year over year, an uptick from the previous month’s reading.

Because inflation hasn’t come down as much as expected so far this year, we’ll likely need to wait a while longer before rates ease.

We could see the Fed cut rates this fall. But if inflation continues to stagnate, we might not get a cut until late in 2024 or in 2025. This would keep mortgage rates elevated.

Mortgage rate predictions 2024

Most major forecasts expect rates to fall a bit in 2024. But exactly when will mortgage rates go down? Here’s how a few of the leading players stack up in their predictions:

The MBA’s forecast suggests that 30-year mortgage rates will fall into the 6.4% to 6.7% range throughout the rest of 2024, and Fannie Mae is forecasting the same. NAR believes rates will average 7.1% this quarter and fall to 6.5% by the end of 2024.

While there’s some dispute on exactly how much rates will decrease, the general consensus is that mortgage rates will go down later in 2024 and end up in the mid-to-low 6% range.

When will mortgage rates go down to 3%?

Rates may one day go back down to 3%, though if current trends hold that’s not likely to happen anytime soon.

Think about the reason why rates went so low in the first place: In response to the COVID-19 pandemic, the Fed cut the federal funds rate to near zero and purchased a large number of mortgage-backed securities to stave off an economic crisis. This allowed mortgage rates to drop as low as they did, with 30-year mortgage rates reaching an all-time low of 2.65% in January 2021, according to Freddie Mac.

No one can predict exactly when another economy-altering event like the pandemic will occur, but barring something extreme, we likely won’t see rates that low again for a while. Lawrence Yun, chief economist at the National Association of Realtors, even told CNBC that he doesn’t think mortgage rates will reach the 3% range again in his lifetime.

Should I wait for mortgage rates to drop before buying a house?

Because mortgage rates are still so high, some hopeful homebuyers have decided to wait for lower rates to start shopping for homes. But that’s not necessarily the best strategy, as there are some advantages to buying right now.

At the moment, the vast majority of borrowers have rates that are much lower than current rates. According to a Redfin analysis of Federal Housing Finance Agency data, 89% of homeowners have a mortgage rate below 6%. Many have even lower rates; 59.4% have a rate below 4%.

High rates have kept many of these homeowners from selling since they don’t want to give up their current rates. While this has severely limited inventory, the lack of additional buyers on the market has also kept prices somewhat moderate.

Afifa Saburi, capital markets analyst for Veterans United Home Loans, says that buying now and refinancing later is a good strategy for buyers who want to avoid competition and the higher home prices that will likely come with it.

“Would-be buyers that can buy can avoid a potentially competitive market by locking in a purchase now and taking advantage of a refinance in the future,” says Saburi.

A mortgage refinance replaces your existing mortgage with a new mortgage, often with the goal of getting a lower rate or lower monthly payment. If you can afford to buy a house now, you could avoid a tough housing market later this year or next year and have the opportunity to lower your housing costs with a refinance once rates fall. Just be sure to shop around and get quotes from multiple mortgage refinance lenders to be sure you’re getting the best rate.