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Mortgage Interest Rates Forecast For 2024

April 19, 2024 5-minute read

Author: Kevin Graham

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If we could reliably predict what was going to happen tomorrow, many of us wouldn’t be in our jobs and instead sitting on a pile of money. But given that the cost of housing impacts our budget so much, the impulse to look at a mortgage interest rates forecast is understandable. While we take a look, we’ll also go over how you can get the best possible mortgage rates.

Mortgage Interest Rate Predictions For 2024

Before we get into predictions from four major housing and mortgage industry participants regarding where mortgage rates are headed, you should know it would probably be easier to predict the weather in any given region 2 years from the date of this writing than it would be to predict the mortgage rates even 3 months from now.

Weather is governed by seasons. The direction of mortgage rates is most heavily influenced by movements in the financial markets. As we’ll see later, that brings into play a lot of different factors that can make mortgage rate prediction a lot more like picking the winning lotto numbers. With that said, here are the best guesses of some organizations whose business is inextricably tied to mortgages.

Freddie Mac

Freddie Mac doesn’t go so far as to predict a specific mortgage rate in its November 2023 forecast. However, the major backer of conventional loans does say that it doesn’t anticipate rates falling below 6% any time soon because the Federal Reserve (Fed) has indicated a preference to keep rates higher for longer.

Fannie Mae

Fannie Mae thinks rates will get up as high as 7.3% for an annual average in 2024 before falling back to 6.9% by 2025. Along with Freddie Mac, Fannie Mae is the other major investor in conforming conventional loans.

National Association of REALTORS® (NAR)

NAR has avoided making any new predictions specific to where mortgage rates are going to be in its latest economic and housing outlook presentations, but the trade group does say it believes mortgage rates have reached their peak. Based on that, they can only go down from here.

National Association of Home Builders

The National Association of Home Builders believes that interest rates will be averaging 7.04% for the 30-year fixed in 2024 before dipping to 5.81% in 2025. The forecast was last updated in November 2023.

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What Happened To Mortgage Interest Rates In 2023?

You can get mortgage rates from a lot of different places, but the source most widely looked to in the industry is the Freddie Mac Primary Mortgage Market Survey®. Average rates were 6.48% for the 30-year fixed on January 5. In the most recent data for November 30, 2023, that same rate was 7.22%.

For much of the year, the rate has gone steadily upward as the Fed indicated it was willing to push rates as high as was necessary to bring inflation under control. On October 26, the 30-year fixed hit its highest point so far this year as it touched 7.79%. Since then, mortgage rates have fallen more than 0.5% on average across survey participants.

Below, you can see a graph of the way mortgage rates have moved throughout 2023.

Line graph showing 2023 mortgage rates.

What Factors Affect Mortgage Rates?

The biggest thing that makes them so hard to predict is the sheer number of factors that affect mortgage rates. This is a list of just the biggest ones:

  • Inflation: Mortgage rates and inflation go hand in hand. When inflation increases, typically interest rates increase too so they can keep up with the value of the dollar. If inflation decreases, mortgage rates drop. During periods of low inflation, mortgage rates tend to stay the same or slightly fluctuate.

  • World events: World events, such as the COVID-19 pandemic and the Russian conflict with Ukraine, affect mortgage interest rates. Over the course of history, mortgage rateshave been affected by World War II, the oil embargo in the 1970s and 1980s, the housing market crash in 2007 and Brexit, for example.

  • Economic crises: Interest rates usually fall early in a recession and typically rise as the economy recovers. For example, let's say you take out an adjustable-rate mortgage (ARM) during a recession; the interest rate will likely increase when the downturn comes to an end. Indicators of economic growth (and economic crises) include employment numbers and gross domestic product (GDP).

  • The Federal Reserve: The Federal Reserve impacts mortgage interest rates through its control of the federal funds rate and its activity in the bond market. When the federal funds rate rises, interest rates go up across the board because it impacts the rate at which banks borrow from each other. Also, when the Fed is a buyer in the bond market, rates are lower because yields are lower, while bond prices are higher when the Fed is a seller.

  • Bond prices: Mortgage interest rates go down as bond prices go up. As bond prices go down, mortgage interest rates go up. Mortgage lenders tie their interest rates closely to 10-year Treasury Mortgage rates increase or decrease depending on demand. In general, if people are feeling more skittish about the prospects for the economy, they’ll invest more money in bonds and yields will go down because they’re considered safer assets. If they’re feeling better about the direction of things, more money ends up in stocks, which offer a higher rate of return, but also greater risk of loss.

  • Property type: How you plan to occupy the property also plays a role in the interest rate you receive. Lenders judge rates not only based on your financial investment, but also your physical attachment to a property. If a home is your primary residence, you’re more likely to prioritize that payment if you get into financial trouble because you live there on a daily basis. On the other hand, if you had to choose, the payment on a vacation home or investment property might not be considered as important. Lenders view these loans as having more risk and charge a higher rate.

  • Personal factors: Mortgage interest rates also depend on lenders taking a look at your personal finances and other personal factors, such as the amount you plan to borrow, your repayment term, employment status and income, loan-to-value ratio and credit score. All of these things, taken together, also affect your personal mortgage interest rate.

Tips For Getting The Best Mortgage Rate

Although you have no ability to influence the market factors that play a role in the day-to-day movement of interest rates, there are things about your financial situation that impact the deal you get from lenders. Here are a couple of tips for getting the best mortgage rate.

  • Save for a bigger down payment: One of the biggest impacts on the interest rate you get is the size of your down payment because the bigger the amount you put down, the less a lender has to give you. This makes the loan less risky in the eyes of lenders. If you’re refinancing, the more equity you have in the home after the loan, the better your rate.

  • Assess and improve your credit score: The higher your credit score is, the better your rate will be generally, assuming your down payment or equity amount are held the same. You can improve your credit score by doing things like keeping a low credit utilization ratio and making your payments on time.

The Bottom Line

No one can ever say for certain where mortgage rates are headed tomorrow, let alone forecast a year or two out. Even among the experts in the field, you can get a wide variation in predictions. The general consensus among forecasters is that rates are widely expected to stay above 6% for a while, but that could change if there’s a shift in market attitudes.

Although mortgage rates are impacted by macroeconomic factors like inflation and global events, it’s also true that your personal and financial situation has a major effect on the rate that you get. You can receive a better rate by making sure you have a substantial down payment and that your credit is in good shape. Ready to move forward? Start the application process!

Kevin

Kevin Graham

Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage, he freelanced for various newspapers in the Metro Detroit area.