Mortgage Interest Rates Forecast for 2024: Will Rates Drop?
The current mortgage interest rates forecast is for rates to continue on a downward trajectory over the remainder of 2024. Due to the Federal Reserve’s recent rate cut in September, and the opportunity for another one in early November, there’s a reasonable chance we’ll see rates trend downward in November.
There are no guarantees, but our market expert is feeling optimistic about what’s to come this fall. Rates have already dropped by half a percentage point since late spring, and we’re likely to see more cuts before the end of the year. If inflation does continue to fall without the broader economy taking a jarring hit, interest rates are likely to dip and give the housing market a chance to pick up steam.
Mortgage rates forecast for November 2024
After the Federal Reserve’s first rate cut of the year in September, 30-year mortgage rates dropped to their lowest point in more than two years — and we could see a similar reaction if the Fed institutes another rate cut this November.
In fact, we can expect two more cuts this year, according to Jacob Channel, LendingTree’s senior economist. If that happens, mortgage rates could fall closer to 6% by the end of 2024. To put that in perspective, 30-year mortgage rates ended October at 6.72% according to the Oct. 31, 2024 Freddie Mac Primary Mortgage Market Survey®.
Still, Channel expects rates to remain high compared to the levels seen during the height of the COVID-19 pandemic, when average 30-year mortgage rates were around 2.65%. Those record lows, as nice as they were, might not ever be seen again in our lifetimes, Channel says.
How does the Federal Reserve affect mortgage rates?
→ A Federal Reserve rate cut directly affects adjustable-rate mortgages, since their interest rates are calculated using a number — known as an index — that fluctuates with the broader economy. The Fed’s cuts are to the federal funds rate, which is a benchmark index.
→ The Fed’s rate cuts indirectly impact fixed-rate mortgages, which can move more independently and, in some cases, can even move in the opposite direction of the federal funds rate. That said, when the federal funds rate drops, mortgage rates tend to follow. They can also drop in anticipation of a federal funds rate cut, as they did just before the Fed’s recent rate cut.
Will home affordability improve in November?
Potential homebuyers can expect better affordability in November than they saw during most of the last few years.
Historically, November is one of the least expensive months to buy a house. That fact, combined with the expectation of more Fed rate cuts, means that the housing market continues to be pricey but is heading in the right direction.
“Lower rates should help make homebuying more affordable,” says Channel. “More affordable mortgages will likely increase buyer demand and competition, while making it easier for sellers to find someone willing to purchase their home.”
Until rates and home prices both start to drop, though, we’ll likely see affordability remain low, Channel says. So far, low housing supply continues to push up home prices. As of late September, the median price for an existing home sat at $404,500, a 3% year-over-year increase.
Why is there a housing shortage?
High rates and the “mortgage rate lock-in” effect, which makes homeowners reluctant to sell, continue to drive up home prices. As of late 2023, nearly 60% of existing homeowners had mortgages with rates below 4%, which represents savings of around $66,000 over the life of the loan compared to current rates. That’s why they’ll likely need to see rates come down further before feeling like it’s time to venture back into the market.
Home sales are picking up slowly but remain low compared to 2023. Purchase volume was up by 10% compared to this same time last year, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey for the week ending Oct. 25, 2024.
Mortgage rates this week
Mortgage rates predictions for refinancing in 2024
Refinancing doesn’t make sense for most homeowners sitting on the low rates they locked in before 2022. That’s when the market began its march upward — moving ever further from the sanguine rates of 2021 which, even at their highest point, barely exceeded 3%.
But, despite the conditions for refinancing being pretty unfriendly throughout 2024, we saw some interesting shifts in September and October. Compared to the same week one year ago, the number of refinance applications were up by 119% on average, according to the MBA’s data for the weeks between Sept. 9 and Oct. 25. That’s a striking increase, but we also need to remember that refinance demand is in the process of recovering from extreme lows.
“Refinancing still remains relatively uncommon from a long-term historical perspective,” Channel adds, “and extremely low relative to where it was during the height of the pandemic. Even if more people are thinking about refinancing today than they were a year ago, we’ve still got a long way to go before it becomes as common as it ‘usually’ is.”
Who does refinancing make sense for right now?
A refinance might make sense for some borrowers as long as they know exactly what benefit they’ll be getting out of it. For example, if you’re refinancing an adjustable-rate mortgage (ARM) to a fixed-rate loan, converting equity to cash with a cash-out refinance or getting a new interest rate that will lower your payments.
Should I wait to refinance after the Federal Reserve’s next interest rate cut?
If you can afford to wait for rates to potentially go lower, Channel notes that it could quite literally pay off. “But, if you’re teetering on the edge of financial ruin or otherwise desperately need to replace your current mortgage with a new one, then you should act sooner rather than later,” he adds.
Channel recommends waiting to refinance when you could get a rate that’s at least 50 basis points
Basis points are units used to measure changes in interest rates. One hundred basis points are equal to 1 percentage point, so 50 basis points are equal to 0.50%.
lower than the one you already have — and ideally 75 to 100 basis points lower.
Current refinance rates for November 2024
Will mortgage rates go down in 2024?
Although pandemic-related inflation took longer to cool than expected, it is cooling. This, and the Fed’s cuts, should help bring mortgage rates down. “Given that this latest Fed rate cut was 50 basis points — larger than what most seemed to expect — and the Fed probably isn’t done cutting rates this year, I’m optimistic that we’ll end 2024 with average rates closer to 6% than 7%,” Channel says.
On the other hand, we need to bear in mind that mortgage rates ebb and flow, and can increase for weeks at a time even when in the midst of a longer-term downward trend.
Ultimately, Channel urges homebuyers to focus on what they can afford in the current market rather than obsessing over the future. It’s impossible to time the market, but borrowers only need to concern themselves with securing affordable monthly payments, not a “perfect” rate. And for now, getting into the market means making peace with a rate above 6%.
How to get the best mortgage rates
1. Boost your credit score
Pay your bills on time, minimize your credit card balances and avoid opening several new credit accounts at once. You’ll get the best conventional mortgage rates with a 780 credit score or higher.
Learn more about ways to boost your credit score.
2. Compare rates from multiple lenders
LendingTree data consistently show that consumers who shop around for mortgage rates typically save money. Get a loan estimate from three to five different mortgage lenders and compare the rates and terms you’re offered.
Learn more about our picks for the best mortgage lenders.
3. Consider paying points
A mortgage point costs 1% of your loan amount, and paying for points allows you to “buy” a cheaper interest rate. Read the fine print if you see an online rate that looks lower than what other lenders are offering — there’s a good chance you’ll pay points to get it.
Ready to see competitive rate offers on LendingTree?Frequently asked questions
If you can afford a mortgage and find a home that suits your needs, now can be a good time to buy despite high rates and a limited number of homes for sale.
“Remember that timing the market is extremely difficult, if not outright impossible,” Channel cautions. “If you’re waiting to make a choice based on what you hope will happen instead of what’s already going on, you could end up missing out on a lot of good opportunities — even in today’s expensive housing market.”
“For there to be an outright crash, we’d need to see the housing market flooded with homes for sale, and that probably won’t happen as long as homeowners can continue to afford their mortgages,” Channel says. Homeowners seem well-equipped to keep making payments, as evidenced by data that show a shrinking foreclosure inventory and a low rate of serious delinquencies, he adds.
A mortgage interest rate is the base rate you’re charged to borrow money, but a mortgage annual percentage rate (APR) is the total cost of taking out a mortgage (the interest rate plus closing costs and fees). Both numbers are expressed as a percentage. For more details, check out our guide to distinguishing an APR versus interest rate.
The Federal Reserve’s monetary policy indirectly impacts fixed-rate mortgages, which are often tied to the 10-year U.S. Treasury bond yield. The Fed’s policies have a direct effect on loans with variable interest rates, including ARMs, credit cards and home equity lines of credit (HELOCs).
Haggle for a lower interest rate by using your mortgage offers as leverage. Ask each lender about matching your lowest quoted rate. Consider making a larger down payment, select an ARM loan with a lower initial rate or ask your lender about your mortgage buydown options.
Discuss mortgage rate lock options with your loan officer once you’re under contract on a home and moving through the application process. Rate locks usually last between 30 and 60 days but can be longer. Watch your expiration date — you may face a rate lock extension fee if your loan doesn’t close before your rate lock expires.
Mortgage rates dropped to a historical low of 2.65% in January 2021, when the Federal Reserve cut the federal funds rate to 0% to stabilize the post-pandemic economy.