For US homeowners and homebuyers alike, the past year has been a rollercoaster ride. Soaring inflation sent mortgage rates skyrocketing, reaching levels not seen since the early 2000s. The dream of homeownership for many seemed to fade further into the horizon. But, as we cautiously peek into 2024, whispers of hope echo on the wind. Could mortgage rates finally come down?
The 2023 Rollercoaster:
It all started with the Fed’s aggressive battle against inflation. Rising interest rates rippled through the economy, sending mortgage rates on a steep climb. October 2023 saw the peak, with the average 30-year fixed rate hitting a brutal 7.79%. This translated to significantly higher monthly payments, chilling the housing market and leaving many buyers frozen in their tracks.
Current Glimmers of Hope:
But November brought a welcome sigh of relief. Rate hikes paused, inflation showed signs of easing, and mortgage rates dipped, falling to around 7.03% by December. This glimmer of hope sparked renewed interest in the housing market, albeit cautiously.
The Experts Weigh In: where are we headed in Mortgage Rates 2024
So, where are we headed in 2024? Will this downward trend continue, or are we in for another wild ride? We surveyed the landscape and gleaned the insights of leading experts to unveil the 2024 mortgage rate forecast:
Expert Insights on 2024 Mortgage Rates:
| Expert | 2024 Rate Predictions | Key Insights |
|---|---|---|
| Lawrence Yun (NAR) | 6% by Spring 2024 | Rates head towards 7% initially, potential decline later. |
| Crystal Sunbury (RSM) | 6% – 6.5% by Spring 2024 | Gradual easing, avoiding major economic shocks. |
| MBA | 6.1% by year-end, 5.5% by 2025 | Decline linked to Treasury rates and reduced spread. |
| Matt Vernon (BOA) | Rate cuts later in 2024 | Lower rates potential, but not in early months. |
| Jack Macdowell (Palisades) | 7% – 7.25% in Q1 2024 | Holds steady if inflation and no further rate hikes in 2023. |
| Glenn Brunker (Ally Home) | Descent in first half of 2024 | Rates nearing peak and set to drop throughout the year. |
Additional Insights:
- Daryl Fairweather (Redfin) emphasizes low inventory’s impact on long-term rate trajectory.
- Melissa Cohn (William Raveis) expects a significant decline by 2025 if inflation remains tame.
- Experts agree economic conditions, Fed policy, and bond market yields shape rate movements.
Refinancing in 2024: A Viable Option?
With rates still significantly higher than pre-pandemic levels, refinancing decisions require careful consideration. Bank of America’s Vernon advises evaluating individual circumstances. Those who secured exceptionally low rates in 2020 and 2021 may find little benefit in refinancing now. However, for those with higher existing rates, the potential for savings, especially if rates continue to decline in the latter half of 2024, merits exploration.
Current Mortgage Rates as of December 14, 2023:
| Loan Type | Interest Rate | Average APR | Monthly P&I per $100,000 |
|---|---|---|---|
| Conforming Loans | |||
| 30-Year Fixed | 6.35% | 6.43% | $690 |
| 20-Year Fixed | 6.03% | 6.12% | $731 |
| 15-Year Fixed | 5.64% | 5.78% | $805 |
| 10-Year Fixed | 5.46% | 5.65% | $885 |
| 7-Year ARM | 6.70% | 7.55% | $719 |
| 5-Year ARM | 6.83% | 7.79% | $726 |
| 3-Year ARM | 8.13% | 8.36% | $846 |
| Government Loans | |||
| 30-Year Fixed Rate FHA | 5.63% | 6.74% | $667 |
| 30-Year Fixed Rate VA | 5.82% | 6.06% | $677 |
| 15-Year Fixed Rate FHA | 5.52% | 6.68% | $773 |
| 15-Year Fixed Rate VA | 5.67% | 6.11% | $781 |
| Jumbo Loans | |||
| 30-Year Fixed Rate Jumbo | 6.62% | 6.69% | $722 |
| 15-Year Fixed Rate Jumbo | 6.55% | 6.66% | $779 |
| 7-Year ARM Jumbo | 7.03% | 7.65% | $752 |
| 5-Year ARM Jumbo | 7.00% | 7.80% | $750 |
| 3-Year ARM Jumbo | 5.75% | 7.57% | $654 |
- Gradual Decline: This week witnessed a downward trend across most loan types, offering a glimmer of hope for homebuyers seeking lower mortgage costs.
- Conforming Loans: All conforming loan rates (30-, 20-, 15-, and 10-year fixed) saw a steady decrease averaging around 0.30%. This could pave the way for more affordable options within the conforming loan limits.
- Government Loans: Both FHA and VA loans followed the downward trend, with their 30-year fixed rates dropping by 0.31% and 0.21%, respectively. This news is particularly encouraging for first-time buyers and veterans utilizing these government-backed programs.
- Jumbo Loans: Jumbo loan rates also participated in the downward slide, albeit marginally. Their 30-year fixed rate dipped by 0.20%. While seemingly small, this decrease signifies movement in the right direction for borrowers seeking mortgages that exceed conforming loan limits.
- ARM Rates: Although fixed rates were the focus of this decline, some ARMs (Adjustable-Rate Mortgages) also experienced minor adjustments. Notably, 5-year ARMs across all loan types saw slight decreases in both rates and APRs.
Refinancing Landscape in 2024:
Despite the recent dip in rates, refinance activity remains slow. This can be attributed to several factors, including:
- Many existing mortgages were secured at historically low rates during the pandemic.
- Current rates, though lower than their peak, still present a hurdle for many borrowers.
- Uncertainty surrounding future rate movements.
Tips for Getting a Lower Refinance Rate:
For those determined to refinance, optimizing your chances of securing a favorable rate is crucial. Here are some strategies:
- Shop around and compare offers from multiple lenders.
- Negotiate with your current lender to match or beat your best offer.
- Improve your credit score.
- Consider a shorter loan term.
- Calculate closing costs and fees to ensure potential savings outweigh expenses.
The Next Five Years: A Tentative Glimpse:
Predicting mortgage rates for the next five years is akin to gazing into a crystal ball, but we can still discern some hazy outlines. The experts mainly agree that housing inventory will play a critical role in the long-term trajectory of rates. Daryl Fairweather, Chief Economist at Redfin, emphasizes that low inventory, even with decreasing rates, could exacerbate affordability issues and keep prices buoyant.
Rate Prediction Spectrum:
Despite the uncertainty, here’s a range of predictions for the next five years:
- Short-term (2-3 years): Melissa Cohn, Regional Vice President at William Raveis Mortgage, expects rates to decline noticeably, potentially reaching 2% lower than current levels by 2025, assuming inflation remains subdued.
- Mid-term (3-5 years): Some experts remain cautious, with Fairweather suggesting rates might fluctuate within a range for a while, with downward pressure building gradually.
What Affects Mortgage Rates?:
Understanding the forces shaping mortgage rates empowers informed decisions. Key factors include:
- Economic conditions: A strong economy, with controlled inflation, generally pushes rates up, while economic weakness can trigger cuts.
- Federal Reserve policy: The Fed’s actions directly influence long-term mortgage rates through adjustments to the federal funds rate.
- Bond market yields: Mortgage rates closely track yields on Treasury bonds, with higher yields leading to higher mortgage rates.
- Lender factors: Each lender sets its rates based on its costs, risk assessment, and competitive market position.
10 FAQs Mortgage Rates 2024
1. Will mortgage rates go down in 2024?
Experts predict a gradual decline in mortgage rates throughout 2024, potentially reaching the 6% range by spring. However, the Fed’s actions and economic conditions will largely determine the pace of this decline.
2. Is it a good time to refinance in 2024?
It depends on your current rate and how much you can save by refinancing. If your rate is significantly higher than current rates and you expect them to continue to decline, refinancing could be beneficial. However, consider closing costs and ensure the savings outweigh the expense.
3. What is a good credit score for getting a favorable mortgage rate?
Aim for a credit score above 740 to qualify for the best rates. Higher scores (800+) can unlock even lower rates.
4. How much down payment do I need?
While 20% down payment is ideal, you can still secure a mortgage with as little as 3% down. However, a larger down payment reduces your loan amount and monthly payments.
5. What’s the difference between a fixed-rate and adjustable-rate mortgage?
A fixed-rate mortgage offers predictable monthly payments throughout the loan term. An adjustable-rate mortgage’s interest rate can fluctuate after an initial fixed-rate period, potentially leading to higher payments.
6. What are closing costs?
These are fees associated with obtaining a mortgage, such as origination fees, appraisal costs, and title insurance. Factor these costs into your budget when considering a mortgage.
7. Can I negotiate my mortgage rate?
Absolutely! Shop around for quotes from multiple lenders and leverage your credit score and down payment to negotiate the best possible rate.
8. How can I improve my chances of getting a good mortgage rate?
Maintain good credit, keep your debt-to-income ratio low, and have a stable income. Additionally, consider getting pre-approved for a mortgage before making an offer on a house.
9. What happens if I can’t make my mortgage payments?
Contact your lender immediately and explore options like loan modification or forbearance. Failing to communicate can lead to foreclosure.
10. Where can I find reliable information about mortgage rates?
Consult government websites like the Consumer Financial Protection Bureau (CFPB) and Federal Housing Administration (FHA), utilize mortgage comparison tools, and talk to experienced mortgage professionals.
Bonus Tip: Remember, mortgage rates are just one factor to consider when buying a home. Choose a mortgage that fits your long-term financial goals and offers comfortable monthly payments.
By having answers to these FAQs, new homeowners can navigate the mortgage world with confidence and make informed decisions about their loans.
Navigating the 2024 Mortgage Landscape:
Whether you’re a budding homeowner or a seasoned homeowner contemplating a refinance, staying informed and adaptable is key. Here are some actionable tips:
- Follow reliable sources for the latest rate updates.
- Consult with a qualified mortgage professional to assess your options.
- Consider your financial situation and goals.
- Don’t rush into decisions – wait for the right opportunity.
- Remember, patience and flexibility are your allies in this dynamic market.
The road ahead might be bumpy, but the path to homeownership or financial optimization through refinancing remains open. By understanding the landscape, staying informed, and making informed decisions, you can navigate the 2024 mortgage maze and emerge victorious.