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Anticipating Lower Mortgage Rates in 2024

Good news if you’ve resolved to buy a home in the new year! Interest rates are widely expected to head downward in 2024 as the Federal Reserve shifts from holding the federal funds rate steady to making a projected series of interest rate cuts. However, mortgage rates appear to be out in front of that trend. Since peaking in late October, interest rates for 30-year fixed-rate loans have steadily declined. While it might not be everything home buyers wished for this holiday season (after all, home prices are still rising), lower rates are a darn good gift. Compare what a home buyer can afford at this week’s average 30-year rate of 6.42% versus late October’s staggering 7.95% average.

2024 Mortgage Rate Predictions

Forecasters expect mortgage rates to fall in 2024, with a significant drop likely occurring after the Federal Reserve cuts short-term interest rates. Financial markets are guessing that the first Fed rate cut will happen in the spring after inflation has gone down for several months in a row. Mortgage rates respond to inflation. They tend to increase when the inflation rate is high and tend to decrease when the inflation rate is low. If inflation forecasts are correct, they spell good news for mortgage borrowers. The Mortgage Bankers Association and Fannie Mae (a finance giant that securitizes mortgages) expect inflation to slow considerably in 2024.

Fannie Mae and the Mortgage Bankers Association predict that mortgage rates will drop in 2024 and predict that the 30-year fixed rate mortgage will decline at least a half a percentage point through the middle of 2024:

	Q1 2024	Q2 2024	Q3 2024	Q4 2024
Fannie Mae	7.0%	6.8%	6.6%	6.5%
MBA	7.0%	6.6%	6.3%	6.1%

Financial Preparedness

If you’re looking to buy this year and hoping to get the lowest mortgage rate possible, start by making sure your finances are in shape. Work on your credit score, pay down high-interest debt and keep your credit utilization in check. An excellent credit score will give you the best interest rate. Call Ellen Wilson at Fidelity Direct Mortgage for more information!