With over three years of experience writing in the housing market space, Robin Rothstein demystifies mortgage and loan concepts, helping first-time homebuyers and homeowners make informed decisions as they navigate the home loan marketplace. Her work.
Robin Rothstein Mortgages and Loans WriterWith over three years of experience writing in the housing market space, Robin Rothstein demystifies mortgage and loan concepts, helping first-time homebuyers and homeowners make informed decisions as they navigate the home loan marketplace. Her work.
Written By Robin Rothstein Mortgages and Loans WriterWith over three years of experience writing in the housing market space, Robin Rothstein demystifies mortgage and loan concepts, helping first-time homebuyers and homeowners make informed decisions as they navigate the home loan marketplace. Her work.
Robin Rothstein Mortgages and Loans WriterWith over three years of experience writing in the housing market space, Robin Rothstein demystifies mortgage and loan concepts, helping first-time homebuyers and homeowners make informed decisions as they navigate the home loan marketplace. Her work.
Mortgages and Loans Writer Caroline Basile Mortgages and Student Loans Deputy EditorCaroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.
Caroline Basile Mortgages and Student Loans Deputy EditorCaroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.
Caroline Basile Mortgages and Student Loans Deputy EditorCaroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.
Caroline Basile Mortgages and Student Loans Deputy EditorCaroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.
Mortgages and Student Loans Deputy EditorUpdated: Sep 10, 2024, 8:30am
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The mortgage rate roller coaster took a thrilling plunge, declining to its lowest level in nearly 15 months and dipping below 6.4% for the first time in 2024.
The average rate on the benchmark 30-year mortgage remained steady at 6.35% for the week ending Sept. 5, according to Freddie Mac data.
Nonetheless, despite expectations that the Federal Reserve will finally cut its benchmark interest rate at its September meeting, many housing market experts don’t anticipate mortgage rates to recede enough in the coming months to make homeownership affordable for many would-be buyers.
Here’s how some experts predict market conditions will affect the average 30-year, fixed-rate mortgage in Q4 2024 and beyond:
“Mortgage rates have already dropped to the mid-6% level following news that the Fed is expected to begin cutting rates at their September meeting, and they may continue to fall. However, any further drop will likely be limited until there is more certainty on rate cuts beyond an initial 25 basis points in September. By the end of the year, they may cut rates by 75-100 basis [points], which could bring mortgage rates to the high-5% to low-6% range,” says Jeff DerGurahian, chief investment officer and head economist at loanDepot.
“Rates will be bumping around over the next few weeks and should come down further as we head into fall,” Lisa Sturtevant, chief economist at BrightMLS, tells Forbes Advisor. “I’m expecting that average rates on a 30-year fixed-rate mortgage will still be between 6.2% and 6.4% by the fourth quarter.”
Fannie Mae expects the average 30-year fixed mortgage rate will continue moving down at a modest pace into the next year, and the 30-year fixed rate will average 6.4% for the second quarter of 2024, followed by an average of 6.2% in Q1 2025.
In its August Economic, Housing and Mortgage Market Outlook forecast, Freddie Mac notes that in anticipation of an upcoming central bank-approved federal funds rate cut has already put downward pressure on mortgage rates. However, while a rate cut should prompt further easing, Freddie Mac expects mortgage rates to experience only gradual declines in the coming quarters.
MBA expects the 30-year fixed-rate mortgage to decline throughout the rest of the year, averaging 6.5% in the fourth quarter, 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 the first quarter of 2025.
“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%.”
“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.”
“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.”
The Federal Open Market Committee (FOMC) voted unanimously to leave the benchmark federal funds rate unchanged at its July two-day policy meeting. The federal funds rate is the overnight borrowing rate for commercial banks and credit unions and indirectly influences mortgage rates.
The decision marked 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.
However, many Fed watchers expect policymakers to finally start cutting rates at their September meeting, especially in light of Federal Reserve Chair Jerome Powell’s remarks at the Federal Reserve’s 2024 Jackson Hole symposium in August, signaling that a rate cut is imminent.
Still, despite this all-but-guaranteed cut, housing experts say don’t expect mortgage rates to drop significantly.
“[N]ot only has the market already priced in a 25 basis point cut at the Fed’s September meeting, but also 25 basis point cuts each in the November and December meetings,” said Ralph McLaughlin, senior economist at Realtor.com, in an emailed statement. “As such, we shouldn’t expect the downward movement in mortgage rates to accelerate unless worse-than-expected economic indicators suggest the market is headed for anything but a soft landing.
“Prospective home buyers expecting a big drop in mortgage rates after the Fed’s September meeting are going to be disappointed,” Sturtevant said.
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 tracks market expectations for rate movements at upcoming FOMC meetings.
To evaluate whether or not a refinance would be realistic, you want to evaluate your reasoning. If the goal is debt consolidation, it could make sense, but if you're trying to reduce the payment, it could be more challenging to achieve in the current higher-rate environment. The only way to know for sure is to speak with a mortgage lender to explore your options.
— Jenn Bourque, loan officer at Empire Home Loans and Forbes Advisor advisory board member
Whether 2024 or 2025 will be a better time to refinance depends on several factors, including the number of times 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 were 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, the remainder of 2024 and into the early months of 2025 may not be 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 refinancing in 2024 could make sense for some.
“If you're holding a mortgage rate around or above 7%, you could see significant savings by refinancing this year,” DerGurahian says. “However, if your rate is 6.5% or lower, it might make sense to wait until 2025, as we're expecting rates to drop to the mid-5% range by mid-year.”
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,” Matt Vernon, head of retail lending at Bank of America, tells Forbes Advisor. “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.”
Refinance volume soared compared to last year but was volatile week-to-week.
Here are recent trends in refinance activity, according to the MBA’s Weekly Mortgage Applications Survey.
