When will mortgage rates fall? (2024)

(NerdWallet) – Mortgage rates are expected to go down sometime in 2024, but the decline probably won’t start in March. Instead, mortgage rates are likely to remain about the same because the economy hasn’t cooled off enough yet to cause them to fall.

When the economy grows robustly, and plenty of jobs are created, prices tend to go up. And when those three factors coexist, they combine to push interest rates higher. That’s what happened in February, and it’s unlikely that we’ll see a reversal of those trends in March.

A strong February leads into March

Rates went up in February, with the average rate on the 30-year mortgage at 6.78% in Freddie Mac’s weekly survey, up from 6.64% in January.

The culprit was a collection of strong economic data, released in February, that showed that the economy was running hot in late 2023 and into January. The overall economy grew at a 3.2% annual rate in the final three months of 2023. In January, the economy created a net 353,000 jobs and the core consumer price index accelerated. These signs of stronger-than-expected economic growth caused mortgage rates to rise in February.

Mortgage rates are unlikely to fall until there are unmistakable signs, for a few months in a row, that the economy is slowing down. We almost certainly won’t see those signs in March, despite two years’ toil by the Federal Reserve.

Eyes on the Fed

In an effort to slow the economy and get inflation under control, the Federal Reserve raised the overnight federal funds rate by 5.25 percentage points from March 2022 to July 2023. Inflation declined, as intended. The core CPI fell from 6.6% in September 2022 to 3.9% in January.

But inflation hasn’t fallen enough. The Fed’s goal is to reduce inflation to a 2% annual rate. The central bank will keep a floor under interest rates until inflation is unambiguously on the way to that 2% target. The Fed isn’t eager to cut the federal funds rate anytime soon.

This commitment was underscored by the title of a speech given Feb. 22 by Fed governor Christopher J. Waller: “What’s the Rush?”

Waller, who is a member of the Fed’s rate-setting Open Market Committee, said in his speech that the central bank must wait to verify that inflation is genuinely cooling off, “and this means there is no rush to begin cutting interest rates to normalize monetary policy.”

Usually Fed policymakers speak enigmatically, but sometimes they make themselves perfectly clear. That’s what Waller did with that speech. He sent an unmistakable signal that the Fed wouldn’t cut the federal funds rate at its March 20 meeting. With a rate cut off the table, there’s not much room for mortgage rates to fall in March.

Waller did say that he expects the Fed to cut short-term rates this year, but added, “the risk of waiting a little longer to ease policy is lower than the risk of acting too soon and possibly halting or reversing the progress we’ve made on inflation.” Therefore, there’s no rush.

Other mortgage rate forecasts

Fannie Mae, the Mortgage Bankers Association and National Association of Realtors predict that mortgage rates will gradually descend in 2024, to around 6% in the final three months of the year.

However, if the Fed keeps the federal funds rate unchanged through the first half of the year, don’t be surprised if forecasts are revised upward.

When will mortgage rates fall? (1)

Looking back at February’s prediction

At the beginning of the month, I predicted that “mortgage rates might not change much in February.” Contrary to the prediction, mortgage rates did change in February: They started to rise in the first week and kept going up most of the month.

But the forecast served a purpose if it persuaded anyone to avoid waiting in vain for mortgage rates to fall in February.

I explained that rates “might remain relatively unchanged until markets believe the Fed is about to loosen monetary policy by cutting the federal funds rate.” That didn’t happen in February and it’s not going to happen in March.

When will mortgage rates fall? (2024)


Will mortgage rates ever be 3% again? ›

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.

Will mortgage rates go down again in 2024? ›

The general consensus among industry professionals is that mortgage rates will slowly decline in the last quarter of 2024. The projected declines have shrunk, though, in recent months. At the start of the year, for instance, Fannie Mae predicted rates would drop to 5.8%.

When can I expect mortgage rates to go down? ›

But until the Fed sees evidence of slowing economic growth, interest rates will stay higher for longer. The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025.

What will interest rates look like in 5 years? ›

ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter. Then, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.

Will mortgage rates go below 5 again? ›

The good news is that inflation is cooling, and many experts expect interest rates to move in a downward direction in 2024. Then again, a two-point drop would be significant, and even if rates fall, they're not likely to get down to 5% within the next year.

How low will mortgage rates go in 2025? ›

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."

How high could mortgage rates go by 2025? ›

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%. Meanwhile, Wells Fargo's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.

What will mortgage rates be in summer 2024? ›

Mortgage Bankers Association (MBA).

MBA's baseline forecast is for the 30-year fixed-rate mortgage to average 6.7% in Q2 and end 2024 at 6.4%.

Should I lock my mortgage rate today? ›

Once you find a rate that is an ideal fit for your budget, lock in the rate as soon as possible. There is no way to predict with certainty whether a rate will go up or down in the weeks or even months it sometimes takes to close your loan.

What time of year are mortgage rates lowest? ›

Historically, mortgage rates tend to be lowest during the winter months, particularly in December and January. However, rates can vary significantly from year to year, so it's essential to keep an eye on current real estate market conditions.

What is the mortgage rate forecast for 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. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.

How many times can you refinance your home? ›

Legally, there isn't a limit on how many times you can refinance your home loan. However, mortgage lenders do have a few mortgage refinance requirements you'll need to meet each time you apply for a loan, and some special considerations are important to note if you want a cash-out refinance.

What is a good mortgage rate? ›

As of May 16, 2024, the average 30-year fixed mortgage rate is 6.84%, 20-year fixed mortgage rate is 6.45%, 15-year fixed mortgage rate is 6.01%, and 10-year fixed mortgage rate is 5.93%. Average rates for other loan types include 6.91% for an FHA 30-year fixed mortgage and 7.02% for a jumbo 30-year fixed mortgage.

Why are mortgage rates so high? ›

When inflation is running high, the Fed raises those short-term rates to slow the economy and reduce pressure on prices. But higher interest rates make it more expensive for banks to borrow, so they raise their rates on consumer loans, including mortgages, to compensate.

Where will mortgage rates be in 10 years? ›

According to their latest forecast for 30-year mortgage rates in October 2023, they expect them to range from 7.40% to 7.86%, with an average of 7.63%. They also predict that mortgage rates will peak at 9.41% in May 2024, before gradually declining to 3.67% by November 2027.

What will mortgage rates be in 2025? ›

One reason being that as the Federal Reserve begins to cut rates, the bond market is expected to become less volatile, leading to a slight decline in mortgage rates. The average 30-year fixed mortgage rate as of Friday is 6.91%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%.

When was the last time mortgage rates were 3 percent? ›

The lowest interest rate for a mortgage in history came in 2020 and 2021. In response to the COVID-19 pandemic and subsequent lockdowns, the 30-year fixed rate dropped under 3% for the first time since 1971, when Freddie Mac first began surveying mortgage lenders.

What will interest rates be in 2025? ›

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%. Meanwhile, Wells Fargo's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.

What will interest rates be in 2024? ›

Interest rates have held steady since July 2023.

At its March 2024 gathering the Fed decided to keep the federal funds target rate at 5.25% to 5.5%, where it has remained since July 2023.

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