Mortgage rates continue their dizzying roller coaster ride.
After hitting a 2024 high of 7.22% to start May, the average 30-year fixed mortgage rate broke under 7%, popped back over 7% at the end of May, resumed its downward trajectory in June and has now risen again.
The average rate on the benchmark 30-year mortgage increased by nine basis points, ascending to 6.95% the week ending July 3, according to Freddie Mac data. A basis point is one one-hundredth of a percentage point.
Despite mortgage rates remaining elevated and fluctuating within a relatively narrow range over the past few months, many housing market experts expect rates to recede slightly in the coming months, assuming the Federal Reserve finally implements cuts to its benchmark interest rate.
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Mortgage Rate Predictions for 2024
Here is how some experts predict market conditions will affect the average 30-year, fixed-rate mortgage in Q3 2024 and beyond:
Freddie Mac: Rates will remain elevated through most of 2024
In its June Economic, Housing and Mortgage Market Outlook forecast, Freddie Mac anticipates that the central bank will approve one rate cut later this year. While this should prompt a gradual easing of mortgage rates, the mortgage giant expects mortgage rates to remain above 6.5% through the end of the year.
Fannie Mae: Rates will average 6.8% in Q3
Fannie Mae revised its anticipated average 30-year fixed mortgage rate for Q3 between its May and June housing forecasts, now projecting an average rate of 6.8%, down from 7.1%. The June forecast also predicts that mortgage rates will average 6.8% in 2024, down from 7% in its previous forecast. As for 2025, Fannie Mae expects mortgage rates to average 6.7%.
National Association of Realtors (NAR): Rates will average 6.9% in Q3
NAR expects the 30-year fixed mortgage rate to average 6.9% in its most recent quarterly forecast published in June, an increase from its previous forecast of 6.7%. The professional real estate organization also revised its forecast upward for Q4 to 6.5% to 6.7% by the end of 2024.
“In the second half of 2024, look for moderately lower mortgage rates, higher home sales and stabilizing home prices,” said chief economist Lawrence Yun, in a June press statement.
Mortgage Bankers Association (MBA): Rates will decline to 6.8% in Q3
MBA expects the 30-year fixed-rate mortgage to decline throughout the year, averaging 6.8% in Q3, according to its June Mortgage Finance Forecast. The MBA had predicted an average Q3 mortgage rate of 6.7% in its May forecast. MBA economists anticipate that the Fed will implement two rate cuts before the end of the year, with the average mortgage rate landing at 6.6% by the end of 2024.
Bank of America: Rates will decline below 7%
“Bank of America global economists now anticipate the first rate cut in December,” says head of retail lending Matt Vernon. “While there’s still optimism that mortgage rates will eventually drop below 7% in the coming months, inflationary pressures are currently keeping them elevated.”
Palisades Group: Rates will stay above 6.25% through 2024
“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%.”
Advisor Credit Exchange: Rates will range between 7% and 7.5% in the coming months
“Until the Federal Reserve can prove to the markets that inflation is under (and remains under) control, inflation will continue to have a magnified impact on the 10-year Treasury and ultimately mortgage rates,” says Bob Smith, head of real estate. “I expect mortgage rates to remain in a bounded range until this gets sorted out and expect minimal impact from any Fed decisions in June.”
Fed Holds Rates Steady, Again: What This Means for Mortgage Rates in 2024
In a move that surprised no one, the Federal Open Market Committee (FOMC) voted unanimously to leave the benchmark federal funds rate unchanged at its June two-day policy meeting and signaled that only one rate cut may come by the end of the year. The federal funds rate is the overnight borrowing rate for commercial banks and credit unions and indirectly influences mortgage rates.
The decision marks the seventh 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.
Many housing industry experts anticipated the Fed implementing several rate cuts by now, followed by a subsequent decline in mortgage rates. However, thanks to stubborn inflation over the first quarter of 2024 and a surprisingly resilient labor market, policymakers have maintained a “higher for longer” rate stance instead.
The Fed remains cautious about changing the rate while it monitors inflation. During a press conference, Powell reiterated that the Fed remains “strongly committed to returning inflation to our 2% goal in support of a strong economy that benefits everyone.”
So, what does all this mean for mortgage rates?
“The fact that the Fed scaled back the number of rate cuts from three to one is going to disappoint those who were hoping for a summer rate drop,” said Dr. Lisa Sturtevant, chief economist at Bright MLS. “Some homebuyers who have been sidelined by affordability challenges are going to wait until rates come down to buy.”
Despite elevated mortgage rates, Danielle Hale, chief economist at Realtor.com, says buyers can secure a lower 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 July 30 and 31. Most Fed watchers expect policymakers to hold the federal funds rate steady, according to the CME FedWatch Tool, an online barometer that gauges market expectations for rate movements at upcoming FOMC meetings.
Is 2024 a Good Time To Refinance?
Whether or not 2024 will be a good time to refinance depends on several factors, including if 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 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, then 2024 is likely not the ideal time to refinance.
“If rates are lower than when you first got your mortgage, it might be a favorable time,” says Vernon. However, whether rates go lower in 2024 will depend, in part, on economic conditions.
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.
“If [mortgage] interest rates dropped to even 5.5%, it could result in significant savings for these homeowners, as refinancing at that rate could result in an average monthly payment of $1,917 for them, a reduction of $284 every month,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion, in an emailed statement.
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.
However, the prospect of a rate cut in the next few months has begun to fade amid persistent inflation and resilient economic data.
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,” says Vernon. “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.”
