The last two years have seen marked increases in mortgage rates across the country. Prospective homebuyers are increasingly concerned that rising interest rates will prevent them from homeownership, and everyone wants to know when mortgage rates will start to decrease. 

But the answer isn’t that simple. Mortgage rates are influenced by a set of factors that can rarely be predicted or controlled, causing alarm for prospective buyers and mortgage professionals. Though the forecast for next year sounds positive, let’s look at what various experts are predicting for mortgage rates in 2024. 
 

Overview of the Federal Reserve Interest Rate Hikes 

In March 2022, the Federal Reserve raised interest rates 0.25% for the first time since December of 2018. At the time, only six more hikes were expected in response to marked inflation across all industries including petroleum, food, and shelter. Although the goals of rate hikes are to stabilize the price of goods and services and prevent a spike in unemployment, the cost of borrowing does, consequently, increase. As a result, prospective homebuyers have found themselves in a dilemma as they seek out home loans with favorable interest rates and prices they can comfortably afford.  

To date, the Federal Reserve has initiated 11 interest rate hikes in 2023. The national average mortgage interest rate is currently around 7.59% for a 30-year fixed mortgage (September 2023 data). Prognosticators are hopeful, however, that these rates will decrease at some point in 2024.  

What Mortgage Experts Think Will Happen in 2024 

Several experts from the financial sector have weighed in on the interest rate hikes and given their best educated guesses on when the country will see a decrease. The general sentiment is that the rates will come down; the debate, however, is when prospective homebuyers can expect to see some relief – and just how much.  

The End of 2023 

According to the chief investment officer of J.P. Morgan’s Asset Management division, Bob Michele, the Federal Reserve may begin to lower interest rates by the end of 2023. His prediction is based on the Federal Reserve’s backtracking on the initial statement that inflation in 2021 and 2022 was transitory. He posits that as the end of the year approaches, the inflation target will be reached and the Federal Reserve will again back down on raising rates, and even lower them.  

First Quarter Interest Rate Predictions For 2024 

Preston Caldwell, a senior economist for Morningstar, believes that the Fed will begin to pare down interest rates in February. Caldwell believes that by the first meeting of 2024, inflation will fall to the 2% target. This will lead to the 30-year mortgage rate decreasing to around 4.5% by 2025. 

Second Quarter Predictions For 2024 

The chief economist for KPMG, Diane Swonk, has called the journey to lower inflation one that is “littered with potholes.” Swonk says one such pothole came in August and even though the Fed decided to pause the rate hikes, in November they may exercise the option to restart them. If inflation continues to be a problem at the end of 2023, we could see another hike because the Fed likes to see quarters of lower inflation instead of singular months. She forecasts that interest rates will not be cut until May 2024.  

The chief US economist for Goldman Sachs, David Mericle, agrees with Swonk. On a recent episode of the podcast Goldman Sachs Exchanges, he noted that the second quarter of 2024 will see a decrease in interest rates, yet he did not predict a specific time at which this could happen. Citing a lag in inflation that will eventually normalize, he dismissed concerns of a recession, and is hopeful that inflation will hit the 2% sweet spot needed to trigger a decrease in interest rates.  

Latter Half of 2024 Predictions 

Vanguard’s global economics team shared its insights on the matter from a global perspective in a letter dated September 14, 2023. Their perspective is that either inflation must decline further, or a recession must happen before the Fed acts to ease interest rates.  

At a meeting of the American Bankers Association’s Economic Advisory Committee, members  predicted that the Fed is mostly finished with its rate hikes and that next year between May and the end of the year, interest rates should begin to decrease by 100 basis points (1%). 

A Word From The CE Shop’s Mortgage Expert 

Michelle White, the National Mortgage Expert for The CE Shop, offered her thoughts on where mortgage rates could be headed next year. According to White, the data is not strong enough to suggest a political link to interest rates as it was in the past, yet the upcoming election cycle could have an impact. Overall, her forecast suggests that rates will lower between 1% and 1.5% at the most at some point in the year.  

What Leading Organizations Foresee For 2024 Interest Rates 

Fannie Mae, National Association of Realtors®, and Mortgage Bankers Association have all offered their predictions for the mortgage market through all four quarters of next year. While their predictions differ in terms of how much rates will decrease, there is a definite consensus that 2024 will be the year for some relief. The following chart shows each organization’s forecast for the rates on 30-year mortgages.  

	Q1 2024	Q2 2024	Q3 2024	Q4 2024
Fannie Mae	6.8%	6.6%	6.4%	6.3%
National Assoc. of Realtors®	6.1%	6.0%	6.0%	6.0%
Mortgage Bankers Association	6.1%	5.8%	5.5%	5.4%

Important Things to Remember About Interest Rates 

Mortgage interest rates are subject to influences, such as market fluctuations. These changes are often due to factors that are beyond human control such as pandemics, war, governmental operations, and other current events that are generally unpredictable. As such, even for economists and other financial experts, it is difficult to determine what interest rates will do from one year to the next.  

If you’re a prospective homebuyer who is concerned about the right time to buy a home, it’s important to consider the current financial standing, the location of the property, future plans for the property (how long you plan to live there), and future refinancing options.   If you’re already in the mortgage industry, staying up-to-date on current mortgage trends and maintain your continuing education to understand how to best serve your clients as the economy changes. While rates are currently high, waiting to buy may put buyers at risk for rates to be even higher months from now.

Courtesy of OMREALTYGROUP.THECESHOP.COM