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Mortgage rates just can’t seem to get into a sustainable downward groove.
After hitting a 2024 high of 7.22% to start May, the average 30-year fixed mortgage rate dropped 19 basis points over the course of the month before rising above 7% again at the end of the month. A basis point is one one-hundredth of a percentage point.
For the week ending June 6, the 30-year fixed rate sat at 6.99%, according to Freddie Mac.
Many housing market experts don’t expect mortgage rates to recede significantly in the coming months unless the Federal Reserve decides to cut its benchmark interest rate.
Mortgage Rate Predictions for 2024
Freddie Mac: Rates will remain above 6.5% through Q2 Freddie Mac maintains that mortgage rates will stay above 6.5% through the first half of 2024, per its March Economic, Housing and Mortgage Market Outlook forecast. In its May forecast, the mortgage giant anticipates the central bank will cut the federal funds rate only once this year, keeping mortgage rates elevated for the remainder of 2024.
Fannie Mae: Rates will average 7.1% in Q3 Fannie Mae revised its anticipated average 30-year fixed mortgage rate trajectory. In its April housing forecast, Fannie Mae projected rates to average 6.6% in Q3 but has since revised this to 7.1%. Moreover, the May forecast predicts that mortgage rates will average 7% in 2024, up from 6.6%.
“For now, we see rates remaining closer to 7 percent through the end of the year—before trending downward in 2025—but note potential downside to that forecast given recent actual movements in rates,” said senior vice president and chief economist Doug Duncan, in a recent press release.
National Association of Realtors (NAR): Rates will average 6.7% in Q3 NAR expects the 30-year fixed mortgage rate to average 6.7% in its most recent quarterly forecast published in April but decline to 6.5% by the end of 2024, assuming the Fed cuts rates.
“The Federal Reserve is delaying and is cautious about inflation, but 6 to 8 rounds of rate cuts through the end of 2025 are likely to bring the interest rates down from current high levels to match those during the pre-COVID years,” said chief economist Lawrence Yun, in a May press statement. “Do not expect any major declines in mortgage rates, however.”
Mortgage Bankers Association (MBA): Rates will decline to 6.7% in Q3 MBA expects the 30-year fixed-rate mortgage to decline throughout the year, averaging 6.7% in Q3, according to its May Mortgage Finance Forecast. MBA economists expect the Fed to implement a rate cut in September and one more before the end of the year, with the average mortgage rate landing around 6.5% by the end of 2024.
Bank of America: Rates will decline below 7% “Bank of America global economists now anticipate the first rate cut in December,” says head of retail lending Matt Vernon. “While there’s still optimism that mortgage rates will eventually drop below 7% in the coming months, inflationary pressures are currently keeping them elevated.”
KPMG Economics: Rates will likely stay within the 7% range through Q2 “We could still see one [Fed] rate cut at the end of the year, but any reacceleration in inflation will push cuts even further,” says senior economist Yelena Maleyev. “The bulk of the declines in rates will occur in 2025; mortgage rates could remain close to 7% for the busy spring home-buying season.”
Palisades Group: Rates will stay above 6.25% through 2024 “The market has consistently overestimated the likelihood, timing, and quantity of the Federal Reserve’s rate cuts,” says managing member and chief investment officer Jack Macdowell. “Based on current data, it is hard to envision more than one to two cuts in 2024 and hard to see mortgage rates drop below 6.25%.”
Advisor Credit Exchange: Rates will range between 7% and 7.5% in the coming months “Until the Federal Reserve can prove to the markets that inflation is under (and remains under) control, inflation will continue to have a magnified impact on the 10-year Treasury and ultimately mortgage rates,” says Bob Smith, head of real estate. “I expect mortgage rates to remain in a bounded range until this gets sorted out and expect minimal impact from any Fed decisions in June.”
Fed Holds Rates Steady, Again: What This Means for Mortgage Rates in 2024
In an unsurprising move, the Federal Open Market Committee (FOMC) announced on May 1 after its latest two-day policy meeting that officials voted unanimously to leave the benchmark federal funds rate unchanged. The federal funds rate is the overnight borrowing rate for commercial banks and credit unions and indirectly influences mortgage rates.
The decision marks the sixth consecutive meeting in which the FOMC has kept its policy rate steady between 5.25% and 5.5%.
Over the past two years, mortgage rates have skyrocketed to their highest levels in decades amid the Fed’s efforts to tame inflation through aggressive interest rate policy actions.
Though many housing industry experts predicted mortgage rates would begin to recede in 2024 as the Fed implemented rate cuts, mortgage rates have surged. This is due partly to signals that the Fed will need to hold rates “higher for longer” as a result of hotter-than-expected inflation readings and a strong labor market.
Due to the stalled progress of lowering inflation to the Fed’s 2% goal, some policymakers have recently stated that there is no urgency to cut rates this year, with one Fed official hinting that a rate hike may be warranted. However, Powell noted at the press conference following the rate announcement that it’s “unlikely that the next policy rate move will be a hike.” So, what does all this mean for mortgage rates?
“In order to see mortgage rates drop more significantly, the Fed will need to see more evidence that inflation is slowing,” said Danielle Hale, chief economist at Realtor.com, in an emailed statement. “My expectation is that it will take longer, and that sets the Fed up for a late summer or early fall adjustment, and mortgage rates could follow suit.”
Melissa Cohn, regional vice president of William Raveis Mortgage is less optimistic about the timing of rate cuts.
“Based on where the economy has gone, we may not see anything until 2025,” said Cohn in an emailed statement.
Consequently, Cohn advises against waiting to jump into the market if you’re keen on buying a home.
“If you buy now before interest rates really come down and prices go up, you are still ahead of the game, even if you’re paying more in a mortgage payment for a short period of time,” Cohn said.
Despite elevated mortgage rates, Hale says buyers can secure a lower rate by comparing lenders or shopping for homes with an assumable mortgage, which is when a seller allows a buyer to take over an existing mortgage and (typically lower) rate. Hale says this hack “can result in lower costs and make home buying possible even before mortgage rates trend more meaningfully lower.”
The next two-day FOMC meeting is June 11 and 12. Policy makers are expected to hold the federal funds rate steady, according to the CME FedWatch Tool, an online barometer that gauges market expectations for rate cuts or hikes at upcoming FOMC meetings.
Is 2024 a Good Time To Refinance?
Whether or not 2024 will be a good time to refinance depends on several factors, including if the Fed cuts interest rates this year and by how much. The mortgage rate you got when you financed your home is another major factor.
Over 40% of U.S. mortgages originated in 2020 and 2021, when interest rates were at record lows. There were also some 14 million mortgage refinances during the same time. If you were lucky enough to secure a mortgage during that time, then 2024 is likely not the ideal time to refinance. “If rates are lower than when you first got your mortgage, it might be a favorable time,” says Vernon. However, whether rates go lower in 2024 will depend, in part, on economic conditions.
Experts believe that once the Fed cuts rates in 2024, refinance volume will improve as borrowers who took on high mortgage rates will jump at the chance to lower their monthly costs.
“If [mortgage] interest rates dropped to even 5.5%, it could result in significant savings for these homeowners, as refinancing at that rate could result in an average monthly payment of $1,917 for them, a reduction of $284 every month,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion, in an emailed statement.
If you’re considering refinancing to lower your monthly payment, keep in mind that not all options yield less interest over the life of the loan.
However, the prospect of a rate cut in the next few months has begun to fade amid persistent inflation and resilient economic data.
Nonetheless, if you’re considering refinancing to lower your monthly payment, keep in mind that not all options yield less interest over the life of the loan.
“Remember that just because you can get a lower rate doesn’t mean you should immediately refinance,” says Vernon. “You may be paying a lower monthly mortgage, but you may have to also extend the life of your loan and refinancing could cost you more in interest.”
If you need assistance navigating the complex real estate market or are looking to buy a home, visit GoodBuy Homes NJ Realty. Our experts are here to help you find the best options and make informed decisions.
