As 2023 brought with it mortgage rates bordering the 8%-mark, the final two months of the year saw a steady decline from that high point, as 2024 kicked off with a slight rise in the 30-year fixed-rate mortgage (FRM) according to Freddie Mac.
The latest Primary Mortgage Market Survey (PMMS) from Freddie Mac as of January 4, 2024, found the the 30-year FRM averaging 6.62%, up slightly from last week’s reading of 6.61%. A year ago at this time, the 30-year FRM averaged 6.48%.
Also this week, the 15-year FRM averaged 5.89%, down from last week when it averaged 5.93%. A year ago at this time, the 15-year FRM averaged 5.73%.
“Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point. However, since then, rates have moved sideways as the market digests incoming economic data,” said Sam Khater, Freddie Mac’s Chief Economist. “Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds. While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise.”
Freddie Mac’s PMMS is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit.
“The Freddie Mac fixed rate for a 30-year loan leveled off this week, increasing just one basis point to 6.62% as the new year began and markets adjusted to incoming economic data,” added Realtor.com Senior Economic Research Analyst Hannah Jones. “The recent mortgage rate plummet past 7% is likely to bring some buyers into the market. Per a recent Realtor.com survey, 11% of prospective buyers say rates would need to dip below this threshold to make it feasible for them to purchase their next home. Though the recent decline in rates has inspired optimism, 12% of prospective homebuyers say rates would need to dip below 6% and more than one-quarter (28%) say rates would need to dip below 4% to bring them into the market. The typical outstanding mortgage has a rate of less than 4%, more than 2.5 percentage points below today’s rate. This gap is likely to keep many sellers on the sidelines, waiting for mortgage rates to come down further.”
And despite the recent slide in mortgage rates, the Mortgage Bankers Association (MBA) reported that conditions during the 2023 holiday season were not exactly ideal for potential home buyers, as the MBA’s Weekly Mortgage Applications Survey for the week ending December 29, 2023 saw mortgage application volume dropping 9.4% from two weeks earlier (note that the MBA’s results included adjustments to account for the holiday season).
“Mortgage rates finished 2023 more than a percentage point lower than their peak in October, but applications to refinance, and buy a home both declined in the final two weeks of the year,” said MBA President and CEO Robert D. Broeksmit, CMB. “MBA expects mortgage rates to continue to decline slowly, which along with more new and existing housing inventory should boost homebuying activity in the months ahead.”
Optimism in the home building sector may alleviate the nation’s housing supply issue, as the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), having found that the recent slide in mortgage rates has helped end a four-month decline in builder confidence, along with recent economic data signal improving housing conditions heading into the new year. The Index found builder confidence in the market for newly built single-family homes rose three points to 37 in December, reversing the trend of the previous four months.
“With mortgage rates down roughly 50 basis points over the past month, builders are reporting an uptick in traffic as some prospective buyers who previously felt priced out of the market are taking a second look,” said NAHB Chairman Alicia Huey. “With the nation facing a considerable housing shortage, boosting new home production is the best way to ease the affordability crisis, expand housing inventory, and lower inflation.”
Jones added, “Pending home sales leveled off in November, matching the previous month’s record-low level. Mortgage rates fell each week in November, but remained above 7% throughout the month, which kept contract signings stable at a low level. Moving forward, the continued decline in mortgage rates will be contingent on cooling inflation and employment data. This week’s Job Openings and Labor Turnover data showed slowing hires and separations, suggesting that Friday’s employment data may follow suit and continue to slow. The current path of falling inflation and employment activity suggests that the Fed’s goal of a ‘soft landing’ may be within reach. Though 2% inflation has not yet been achieved, progress towards this level is good news for the housing market.”
FAQs
Mortgage rate predictions 2024
The MBA forecast suggests that 30-year mortgage rates will fall to the 6.6% by the end of 2024, while Fannie Mae and NAR predict rates will end the year around 6.7%.
What is Freddie Mac predicting about interest rate? ›
Mortgage rate predictions for 2024
The 30-year fixed-rate mortgage averaged 6.77% as of July 18, according to Freddie Mac. Four of the five major housing authorities we looked at project 2024's third quarter average to finish above that.
What will cause mortgage rates to fall? ›
Bond yields drop when inflation drops." And, right now, many signs point to a Fed rate cut in the near future — especially now that inflation has been cooling. "Mortgage rates will drop as inflation eases and bond yields drop," Cohn says.
How does the Federal Reserve affect mortgage rates will mortgage rates be affected over the next year why? ›
While the Federal Reserve doesn't directly set mortgage rates, it influences them by making changes to the federal funds rate, the interest rate that banks charge each other for short-term loans. The Fed's decisions alter the price of credit, which has a domino effect on mortgage rates and the broader housing market.
What are mortgage rates expected to be in 2025? ›
Mortgage Rates Prediction For 2024 and 2025
Freddie Mac anticipates that mortgage rates will ease in 2024 and fall below 6.5% in 2025, potentially triggering a wave of refinancing activity. High mortgage rates have slowed the U.S. real estate market in 2024, resulting in fewer home sales and reduced affordability.
What is the interest prediction for 2024? ›
Key points in the forecast:
The interest rate peaked at 5.25% in 2023 and is expected to be cut to 4.75% by the end of 2024. It is expected to be cut to 4.35% by the end of 2025 and then to 3.95% at the end of 2026.
What is Freddie Mac's interest rate today? ›
| Change |
|---|
| Average Rates | Current | 1 week |
|---|
| 30 Yr. Fixed | 6.77% | -0.12% |
| 15 Yr. Fixed | 6.05% | -0.12% |
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Why choose Freddie Mac over Fannie Mae? ›
The primary difference between Freddie Mac and Fannie Mae is the types of lenders they source their mortgages from. Fannie Mae buys mortgages from larger, commercial banks, while Freddie Mac buys them from much smaller banks.
Are mortgage rates predicted to drop? ›
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. Here's where mortgage interest rates are headed for the rest of 2024 and how that will impact the housing market as a whole.
Mortgage Rates Are Influenced by the Federal Reserve
Mortgage interest rates and the stock market are not related but they do seem to have parallel movement patterns. That means if the economy is doing poorly, you will be losing money on your stock investments but getting a sweet deal on a mortgage loan.
What will cause interest rates to drop? ›
Conversely, an increase in the supply of credit will reduce interest rates while a decrease in the supply of credit will increase them. An increase in the amount of money made available to borrowers increases the supply of credit. For example, when you open a bank account, you are lending money to the bank.
Do mortgage rates go down when the Fed cuts rates? ›
If investors believe the Fed may cut rates and inflation is decelerating, mortgage rates will typically trend down.
What happens when the Fed lowers interest rates? ›
Lower rates make borrowing money cheaper. This encourages consumer and business spending and investment and can boost stock prices. Lower rates can also lead to inflation, which undermines the effectiveness of low rates. Higher rates discourage spending and can depress company returns and, therefore, stock prices.
Should interest rates go down in 2024? ›
The good news: With the U.S. Federal Reserve widely expected to begin cutting its benchmark interest rate in 2024, mortgage rates could drop as well—at least slightly. But that doesn't necessarily mean a return to the pre-pandemic era of more affordable mortgages and home prices.
Will mortgage rates ever be 3% again? ›
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.
Will car interest rates go down in 2024? ›
Auto loan rates for new and used vehicle purchases fell in the first quarter of 2024 to 6.73% and 11.91%, respectively, down slightly from the 15-year highs we saw at the end of 2023, according to Experian.
Will mortgage rates go down in 2026? ›
"By the end of 2026, borrowing rates are expected to have declined substantially as inflation returns close to target," the global financial institution said in a report. High interest rates in the U.S. have tightened financial conditions in the world's largest economy.
Will mortgage rates go down in 2027? ›
Will mortgage rates come down in the next 5 years? Lord: “For the rest of 2023, I predict rates for the 30-year fixed-rate mortgage will average 7.3%, followed by 6.1% in 2024, 5.5% in 2025, 5% in 2026, 4.5% in 2027, and 4.5% in 2028.
As 2023 brought with it mortgage rates bordering the 8%-mark, the final two months of the year saw a steady decline from that high point, as 2024 kicked off with a slight rise in the 30-year fixed-rate mortgage (FRM) according to Freddie Mac.
