Are mortgage rates falling below 7 percent?
Since the start of 2024, the 30-year fixed-rate mortgage has not reached seven percent but has not dropped below 6.6 percent either. While incoming economic signals indicate lower rates of inflation, we do not expect rates will decrease meaningfully in the near-term.
In summary, it is unlikely that mortgage rates in the US will ever reach 3% again, at least not in the foreseeable future. This is due to a combination of factors, including: Higher Inflation: Inflation is currently at a 40-year high in the US, and the Federal Reserve is raising interest rates to combat it.
The 30-year fixed mortgage rate is expected to fall to the low-6% range through the end of 2024, dipping into high-5% territory by early 2025. Here's where mortgage interest rates are headed for the rest of the year and how that will impact the housing market as a whole.
We expect mortgage rates to dip below 6 percent by year-end 2024 and for homebuilders to continue to add new supply, both of which should aid affordability. Additionally, the decline in mortgage rates is likely to push refinancing volumes upward, along with some pickup in purchase financing.
Top-tier borrowers could see mortgage rates in the high-6% range, while lower-credit and non-QM borrowers could expect rates well above 7%. Of course, mortgage rates are famously volatile and it's possible a good mortgage rate next year might be substantially higher than what it is today.
That means the mortgage rates will likely be in the 6% to 7% range for most of the year.” Mortgage Bankers Association (MBA). MBA's baseline forecast is for the 30-year fixed-rate mortgage to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.
Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
The combination of high mortgage rates, steep home prices and low inventory levels are lining up to make the 2024 housing market a challenging one for both buyers and sellers. But rates have cooled a bit — if that continues throughout the year, as some experts predict, then market activity should heat up in response.
The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%.
On 21 March 2024, the Bank of England held the base rate at 5.25% for the fifth time in a row. Financial markets are currently predicting the first cut in interest rates will be in June 2024, falling to around 3% by the end of 2025, according to the latest forecasts from Capital Economics.
What is a good mortgage rate?
FICO Score | National average mortgage APR |
---|---|
660 to 679 | 7.291% |
680 to 699 | 7.077% |
700 to 759 | 6.900% |
760 to 850 | 6.678% |
Do Interest Rates Rise or Fall in a Recession? Interest rates usually fall during a recession. Historically, the economy typically grows until interest rates are hiked to cool down price inflation and the soaring cost of living. Often, this results in a recession and a return to low interest rates to stimulate growth.
Interest rates have held steady since July 2023.
The Fed raised the rate 11 times between March 2022 and July 2023 to combat ongoing inflation. After its December 2023 meeting, the Federal Open Market Committee (FOMC) predicted making three quarter-point cuts by the end of 2024 to lower the federal funds rate to 4.6%.
Generally, it's recommended to spend between 25% to 33% of your gross monthly income on housing. For a $70,000 salary, this translates to a monthly mortgage payment of approximately $1,450 to $2,000. However, the exact amount can vary based on your personal circ*mstances and the type of loan you choose.
At a 7.00% fixed interest rate, a 30-year $100,000 mortgage may cost you around $665 per month, while a 15-year mortgage has a monthly payment of around $899.
Near the end of October 2022, the 30-year mortgage rate jumped from 6.94% to 7.08%, according to Mortgage buyer Freddie Mac. Prior to that, the last time the average mortgage rate hovered around 7% was in April of 2002.
Mortgage rates are going to stay above 6% through 2025, according to estimates from Goldman Sachs.
Mortgage rates will decrease in 2024, and buyers will pay fewer discount points. By summer, first-time home buyers should expect current mortgage rates near 4.25 percent.
10-year treasury yield forecast in the U.S. 2023-2026. The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent.
Product | Interest Rate | APR |
---|---|---|
30-Year Fixed Rate | 6.98% | 7.02% |
20-Year Fixed Rate | 6.82% | 6.87% |
15-Year Fixed Rate | 6.46% | 6.53% |
10-Year Fixed Rate | 6.34% | 6.42% |
What is prime rate today?
The current Bank of America, N.A. prime rate is 8.50% (rate effective as of July 27, 2023).
30-Year Fixed-Rate Mortgage Average Since June 2021
The drop comes, however, after a combined 32-point climb over the prior three days. Now averaging 6.47%, 15-year rates are about a third of a percentage point pricier than the seven-month low of 6.10% seen just before the new year.
Even if a crash is predicted, it doesn't mean it's guaranteed to happen. If you're just looking to buy a home, you should do what makes the most sense for your household's needs and finances, rather than viewing the home as an investment.
Competition levels may also be lower than spring and summer, especially if you're searching in an area that's popular among families with kids. If getting the lowest price possible is your main priority, consider searching for a home in November or December.
Best Time to Sell Your House for a Higher Price
April, June, and July are the best months to sell your house in California. The median sale price of houses in June 2023, was $796,400, which is expected to grow more in 2024. However, cities like Arcadia and San Mateo follow an upward trend throughout the year.
References
- https://newsroom.bankofamerica.com/content/newsroom/home/prime-rate-information.html
- https://themortgagereports.com/76824/what-is-a-good-mortgage-rate-today
- https://www.cbsnews.com/news/how-far-will-mortgage-rates-fall-when-fed-cuts-rates-what-experts-say/
- https://www.businessinsider.com/personal-finance/average-mortgage-interest-rate
- https://www.progressive.com/answers/best-time-to-buy-a-house/
- https://www.bankrate.com/mortgages/30-year-mortgage-rates/
- https://hoa.org.uk/advice/guides-for-homeowners/i-am-managing-2/mortgage-rate-forecast/
- https://www.cnbc.com/select/when-will-interest-rates-drop/
- https://www.noradarealestate.com/blog/will-mortgage-rates-ever-be-3-percent-again/
- https://www.fastcompany.com/91087490/housing-market-where-forecasters-expect-mortgage-rates-through-2025
- https://www.fanniemae.com/newsroom/fannie-mae-news/mortgage-rates-expected-dip-below-6-percent-2024-boosting-home-sales
- https://www.investopedia.com/ask/answers/102015/do-interest-rates-increase-during-recession.asp
- https://www.investopedia.com/mortgage-rates-drop-for-almost-every-loan-type-8625187
- https://themortgagereports.com/70827/70k-per-year-salary-how-much-house-can-i-afford
- https://www.statista.com/statistics/275190/ten-year-treasury-constant-maturity-rate-in-the-united-states-as-of-2009/
- https://www.finder.com/mortgages/100000-mortgage
- https://www.mpamag.com/us/mortgage-industry/guides/historical-mortgage-rates-in-the-usa-highest-high-and-lowest-lows/433237
- https://www.businessinsider.com/personal-finance/when-will-the-housing-market-crash
- https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/
- https://www.houzeo.com/blog/best-time-to-sell-a-house-in-california/
- https://www.bankrate.com/real-estate/housing-market-2024/
- https://homebuyer.com/research/2024-mortgage-rates
- https://money.usnews.com/loans/mortgages/mortgage-rate-forecast
- https://finance.yahoo.com/news/chart-day-mortgage-rates-stay-030536086.html