The conversation that has had no real evidence of which direction it will turn is with mortgage rates. They were up as high as 7.39% for a 30 year fixed as of May 2024, and have recently dropped down to 6.73% as of August 2024. I’ve heard different reports from all different sources, so to help you understand if rates are expected to drop at all for the remainder of 2024, see the responses from various experts according to Forbes Advisor.

Mortgage Rate Predictions for 2024

Here is how some experts predict market conditions will affect the average 30-year, fixed-rate mortgage in Q3 2024 and beyond:

Freddie Mac: Rates will remain elevated through most of 2024

In its July Economic, Housing and Mortgage Market Outlook forecast, Freddie Mac said it anticipates that the central bank will approve one rate cut later this year. While this should prompt a gradual easing of mortgage rates, the mortgage giant expects mortgage rates to remain above 6.5% through the end of the year and then descend below 6.5% in 2025.

Fannie Mae: Rates will average 6.8% in Q3 and 6.7% in Q4

Fannie Mae expects the average 30-year fixed mortgage rate to trend slightly down between for Q3 and Q4 2024. Fannie Mae forecasts the downward trend will continue into the next year, and the 30-year fixed rate will average 6.5% in Q1 2025.

National Association of Realtors (NAR): Rates will average 6.9% in Q3

NAR expects the 30-year fixed mortgage rate to average 6.9% in its most recent quarterly forecast published in June, an increase from its previous forecast of 6.7%. The professional real estate organization also revised its forecast upward for Q4 to 6.5% to 6.7% by the end of 2024.

“In the second half of 2024, look for moderately lower mortgage rates, higher home sales and stabilizing home prices,” said chief economist Lawrence Yun, in a June press statement.

Mortgage Bankers Association (MBA): Rates will average 6.8% in Q3

MBA expects the 30-year fixed-rate mortgage to decline throughout the rest of the year, averaging 6.8% in Q3 and then landing at 6.6% in Q4, according to the real estate finance association’s July Mortgage Finance Forecast. MBA economists anticipate rates to continue trending downward next year, averaging 6.4% in Q1 2025.

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%.”

RE/MAX: Rates will drop to 6.6% at the end of the 1st Quarter of 2025

“Economists predict that mortgage rates will remain elevated for most of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates,” Dave Liniger, co-founder of RE/MAX, tells Forbes Advisor. “Even then, rates are unlikely to return to the lows seen during the pandemic, with investors predicting just one or two rate reductions this year.”

HSH.com: 30-year fixed-rate mortgages will average between 6.6% and 6.9% through September

“Mortgage rates have moved lower in recent weeks amid growing expectation that the Fed will soon be lowering short-term rates,” says Keith Gumbinger, vice president at HSH.com, a mortgage website. “We’ll know more about their future direction after the September Fed meeting concludes.”

loanDepot: Mortgage rates could fall to the mid-six percent range

“The Fed could begin to cut rates as soon as September, and with rates for the 30-year fixed mortgage hovering around 7%, we could see them fall to the mid-six percent range by the end of the year,” says Jeff DerGurahian, chief investment officer and head economist at loanDepot.

Fed Holds Rates Steady, Again: What This Means for Mortgage Rates in 2024

In a move that surprised few, the Federal Open Market Committee (FOMC) voted unanimously to leave the benchmark federal funds rate unchanged at its July two-day policy meeting. The committee also signaled that at least one rate cut was possible this year.

The federal funds rate is the overnight borrowing rate for commercial banks and credit unions and indirectly influences mortgage rates.

The decision marks the eighth 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 soared to their highest levels in decades, fueled, in part, by the Fed’s aggressive interest rate policy actions to tame inflation.

Earlier this year, many housing industry experts expected the Fed to have implemented several rate cuts by now and that declining mortgage rates would follow, but inflation was too sticky. However, now that inflation is creeping closer to the Fed’s 2% goal, most Fed watchers expect a rate cut in September.

However, when pressed by reporters at a post-meeting press conference, Federal Reserve Chair Jerome Powell remained coy, saying “a reduction in our policy rate could be on the table as soon as the next meeting in September” but will hinge on “the totality of data” instilling confidence that inflation is under control.

So, what will it mean for mortgage rates if the Fed votes to cut rates?

“Prospective homebuyers expecting a big drop in mortgage rates after the Fed’s September meeting are going to be disappointed,” said Dr. Lisa Sturtevant, chief economist at Bright MLS. “The mortgage market may have already largely built in the impending rate cut, as we’ve seen mortgage rates come down over the past few weeks.”

BrightMLS expects mortgage rates to decline in the fall and hover around 6.4% by the fourth quarter. Nevertheless, home prices will remain elevated—particularly for first-time buyers—but increased inventory may provide more moderately priced options.

In the meantime, Danielle Hale, chief economist at Realtor.com, says buyers can secure a lower mortgage rate by comparing lenders or shopping for homes with an assumable mortgage. An assumable mortgage 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 September 17 and 18. Most Fed watchers expect policymakers to reduce the federal funds rate by 25 basis points, according to the CME FedWatch Tool, an online barometer that gauges market expectations for rate movements at upcoming FOMC meetings.

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.

“Right now, roughly two-thirds of Americans with a mortgage carry an interest rate below 4%,” DerGurahian tells Forbes Advisor. “Even with one or two possible rate cuts from the Fed in the second half of this year, rates will not drop below that point, making a refinance a tough sell.”

However, he notes that it could be worth considering for the two million people with rates over 7%, especially if the Fed implements more than one rate cut.

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.

“For example, if you are holding a 6.5% rate on a $500,000 30-year fixed mortgage, you are likely paying around $3,160 per month, DerGurahian says. “If you refinance that at 5.5%, you would be paying around $2,840 per month, saving you approximately $320 monthly.”

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.”

How To Get a Lower Mortgage Refinance Rate

The good news is that, despite elevated rates, there are methods you can employ to secure a lower rate. These methods might be especially beneficial if you bought a home between mid-October and early November 2022 or mid-August through early December 2023 when rates were over 7%.

Because there are closing costs and fees associated with refinancing, many mortgage experts say refinancing only makes sense if you can snag a rate that’s at least 1% lower than your current rate.

Here are some actions you can take to whittle down your refinance rate:

Get rate quote estimates from at least three lenders
Ask lenders about waiving or reducing closing costs
Negotiate with your lender to match the best deal
Take steps to strengthen your credit score
Save for a larger down payment
Choose a shorter-term loan
Buy discount points

Mortgage Rate Predictions for the Next 5 Years

Melissa Cohn, regional vice president at William Raveis Mortgage, tells Forbes Advisor she hopes mortgage rates will hover in the 5% range next year but that the presidential election could factor into it.

“The fiscal policies of the new administration could be inflationary and keep rates higher than we hoped for," she says.

Nonetheless, Cohn maintains a positive long-term outlook.

“If inflation sticks at 2%, that will promote stable to lower rates over the next five years,” said Cohn.

Experts say housing inventory will play a critical role once rates descend enough to attract more buyers.

“When rates come down, we’re going to be in store for another hot housing market where there are more buyers than sellers jacking up prices because we haven’t solved the problem” of low inventory, says Daryl Fairweather, chief economist at Redfin. “It’s still that affordability problem. That’s going to stay with us.”

What Affects Mortgage Rates?

A complex set of factors impact mortgage interest rates, including broader economic conditions, the monetary actions of the Federal Reserve (to some extent) and inflation. However, long-term mortgage rates are directly impacted by the bond market. The rate you’re offered on a mortgage will also depend on the lender you work with, its business costs and your financial profile.

Demand for mortgages can also affect rates, pushing them higher as available capital for lending tightens. Conversely, when there’s less borrower demand—as we’re seeing now due to average interest rates hovering in the high 6% to low 7% range—lenders might consider offering more competitive rates or other incentives to attract borrowers.

Source: Forbes

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