Exciting news for prospective homebuyers: The anticipated decrease in mortgage rates may soon become a reality. Having already dropped significantly from their peak in October, mortgage rates could potentially dip below 6% by the close of 2024.
Recent economic indicators suggest a slowdown in inflation and a cooling of the economy. The Federal Reserve has expressed satisfaction with these trends and signaled its readiness to consider reducing the federal funds rate this year. As a result, this could alleviate much of the upward pressure on mortgage rates.
However, it's important to note that while rates may decrease, they are unlikely to return to the historic lows witnessed in 2020 and 2021. Additionally, once rates do decline, homebuyers may face new challenges such as heightened competition and escalating home prices.
The burning question remains: Will mortgage rates indeed decrease in 2024? At present, it appears highly probable, but there are important considerations for homeowners and prospective buyers to bear in mind.
The movement of mortgage rates is heavily influenced by economic conditions. Throughout 2022, rates surged in response to escalating inflation. In an effort to combat this upward trend in prices, the Federal Reserve took decisive measures to increase the federal funds rate, consequently maintaining elevated mortgage rates.
However, there has been a significant deceleration in inflation since its peak in June 2022, when prices had surged by 9.1% year over year, as reported by the Bureau of Labor Statistics. By December 2023, the Consumer Price Index had risen by 3.4% year over year, and it is anticipated to further slow down in the upcoming months.
Fannie Mae forecasts that 30-year mortgage rates will fall below 6% this year, potentially reaching 5.8% by the conclusion of 2024. Although there are varying opinions on the extent of the decrease, there is a prevailing consensus that mortgage rates will decrease in 2024. It is even conceivable that they may approach or dip below the 6% mark by the year's end.
The bottom line is mortgage rates are likely to fall in 2024, but don't expect to see 3.5% 30 year mortgages in the near future. A plethora of economic conditions will influence the Federal Reserve's decision to cut, maintain, or even increase interest rates.