2024 Mortgage Rates: Gradual Decline Predicted
Mortgage rates had a tumultuous journey in 2023, but 2024 looks to offer a steadier downward trend. Greg McBride, Bankrate’s chief financial analyst, anticipates a gradual rate decrease throughout the year, aiming for a 5.75 percent rate by the year’s end.
McBride projects mortgage rates to linger mostly in the 6 percent range, with potential drops below 6 percent expected in the latter part of the year. Various forecasts from institutions like the Mortgage Bankers Association and Fannie Mae echo similar expectations, predicting rates to range between 6.1 and 6.5 percent by the end of 2024.
Throughout 2023, mortgage rates fluctuated significantly, hitting a low of 6.27 percent in February and soaring to 8.01 percent by October amid economic shifts. The Federal Reserve’s actions to curb inflation led to rate hikes earlier in the year, influencing mortgage rates’ roller-coaster trajectory.
Anticipating cooling inflation and a potentially softer job market, the Fed hinted at rate cuts in 2024. This sentiment resulted in a considerable drop in mortgage rates following the Fed’s December meeting, prompting a shift in investor activity and expectations.
However, the correlation between the Fed’s actions and mortgage rates is less direct; rates are determined by investor demand. McBride compares it to a reaction akin to saying “ice cream” in front of children – a fervent reaction to the prospect of lower interest rates among investors.
The mortgage rate swings witnessed in 2022 and 2023 were propelled by economic performance, and the downward trend anticipated for 2024 is based on expectations of a moderated job market and fading inflation, leading to Fed rate cuts. Nevertheless, these projections come with uncertainties.
The 10-year Treasury yield significantly influences fixed mortgage rates, historically holding a margin of about 2 percentage points. As the Fed adjusts rates, the 10-year yield is expected to fluctuate, setting the stage for mortgage rates’ general downward trend in 2024, albeit with occasional fluctuations.
Despite the potential for decreased rates, the housing market’s recovery isn’t solely reliant on this factor. High home prices and limited inventory remain significant obstacles. The National Association of Realtors forecasts sales to reach 4.71 million in 2024, highlighting the ongoing challenges of affordability and limited housing supply in the market.