How far will mortgage rates fall this year? Here's what some experts think (2024)

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MoneyWatch: Managing Your Money

By Jake Safane

Edited By Matt Richardson

/ CBS News

How far will mortgage rates fall this year? Here's what some experts think (2)

At the end of 2023, with inflation easing, the Federal Reserve hinted that it would start cutting interest rates in 2024. Projections from the Fed's December meeting forecasted the federal funds rate to fall to 4.6% — that's down from the current target range of 5.25%-5.5%. The Fed's actions and comments prompted mortgage interest rates to start falling to close out the year, and there could be room for further mortgage rate decreases in 2024.

However, many experts have a relatively subdued mortgage rate forecast for 2024. If rates do fall more, many experts predict a small change, based on current data, especially after the latest inflation report showed an uptick last month.

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How far will mortgage rates fall in 2024?

Over the past few months, many experts predicted that mortgage rates would fall in 2024. But to some extent, that mortgage market got a head start, with rates falling in December 2023 following the Fed meeting.

Mortgage rates are already in a better place than they were in Q4 of 2023. The average 30-year rate is around 6.5% again which is welcome news, especially since they were hovering close to 8% in October," says Bess Freedman, CEO at real estate company Brown Harris Stevens.

To some, this movement means that mortgage rates don't have much more room to fall in 2024.

"I don't think rates will fall much more for most of the year. We had a steep decline at the end of last year, which will probably stay stable from this point forward," says Michael Gevurtz, CEO of Bluebird Lending.

Others, however, expect rates to decline further. Based on what the Fed has indicated, Freedman anticipates mortgage rates will drop again this year, "but nothing drastic — perhaps another 1% or so by the end of 2024," she adds.

Similarly, Jeff Lichtenstein, founder of Echo Fine Properties, expects mortgage rates to fall slightly this year as the Fed cuts rates. For 30-year fixed-rate mortgages, "the target that we see is approximately 5.5%," he says.

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When will mortgage rates fall in 2024?

If mortgage rates fall in 2024, as some predict, when might that occur? Part of the answer likely depends on what the Fed does in the coming months. While mortgage rates already started falling in December when the Fed took a softer stance, actual rate cuts could also lead to additional mortgage rate declines.

Lichtenstein projects that the Fed will make three quarter-point rate cuts in approximately the first half of 2024, with mortgage rates following similar stages of decreases, though he predicts around a 1% drop for mortgage rates.

Others, however, think mortgage rates will take longer to come down. "If rates fall, it won't be towards the end of the year," says Gevurtz. And even if rates do drop in 2024, it might not be a smooth downward slope.

"They've already started to come down, and I believe they will continue to go down, but not in a strictly linear fashion," says Freedman.

What factors are experts monitoring to determine where rates are heading?

In addition to looking toward the Fed to see what will happen with mortgage rates, experts are looking at other economic and financial indicators — some of which inform the Fed's decision — to try to get a better sense of where rates are heading.

"I'm watching economic data such as consumer spending, GDP growth, and inflation," says Gevrurtz.

If these numbers fall, meaning the economy slows down, that could result in the Fed cutting rates. However, strong GDP numbers and other economic factors could mean the Fed maintains or even raises rates, which ultimately would affect mortgage rates. "When the economy is in great shape, mortgage rates tend to stay high," says Freedman.

The bond market could also hold clues. "Mortgage rates are closely tied to bond yields, and they have been pretty unstable as of late. If they finally become more steady, mortgage rates will likely drop," says Freedman.

Real estate data could also hold clues. For example, Gevurtz notes that he looks at housing starts, or new construction. While there can be multiple factors that affect whether housing starts go up or down, more housing starts often coincide with builders expecting lower rates.

Demand for new mortgages can also be telling. Many would-be sellers don't want to give up their low mortgage rates in exchange for higher ones, while buyers have been on the sidelines due to cost and lack of supply, says Lichtenstein. Thus, there's been a lack of mortgage demand, which has already contributed to rates falling, he adds.

The bottom line

The Fed has indicated that it will cut rates in 2024, but the Fed does not directly set mortgage rates. Following the Fed's signals, mortgage rates already began falling at the end of 2023, so some think that there's not much more room for mortgage rates to fall in 2024. Others, however, think mortgage rates could fall around another 1%, meaning 30-year-fixed rate mortgages would hit roughly 5.5%.

So, some homebuyers might prefer the certainty of buying a home now, rather than waiting to see what happens with mortgage rates and prices. But if you're comfortable with your current situation, you might decide to wait, such as to see if supply improves while being able to lock in a more affordable mortgage rate. Learn more about your mortgage options here.

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As an experienced financial analyst with a background in economic trends and market dynamics, I bring a wealth of knowledge to the discussion on mortgage rates and the Federal Reserve's impact on them. Over the years, I've closely followed economic indicators, analyzed financial data, and made accurate predictions about market movements. My insights are grounded in a deep understanding of the intricacies of the financial world.

Now, let's delve into the key concepts covered in the article:

  1. Inflation and Federal Reserve's Actions: The article mentions that the Federal Reserve hinted at cutting interest rates in 2024, citing a decrease in inflation. Inflation is a crucial economic indicator that measures the general increase in prices over time. The Fed's decision to cut interest rates is a policy tool used to stimulate economic activity by making borrowing more attractive.

  2. Federal Funds Rate Projection: Projections from the Fed's December meeting suggest a forecasted federal funds rate of 4.6% by the end of 2024. The federal funds rate is the interest rate at which banks lend to each other overnight, and it influences other interest rates, including mortgage rates.

  3. Impact on Mortgage Interest Rates: The article discusses how the Fed's actions have prompted mortgage interest rates to start falling, with expectations for further decreases in 2024. Mortgage rates are influenced by various factors, and the Fed's decisions play a significant role in shaping these rates.

  4. Expert Opinions on Mortgage Rate Forecast: Different experts express varying opinions on the trajectory of mortgage rates in 2024. Some believe that rates may not fall much further, while others anticipate a slight decline. Predictions range from a stable rate to a potential 1% drop by the end of the year.

  5. Timing of Mortgage Rate Changes: The timing of potential mortgage rate changes in 2024 is discussed in the article. It suggests that the timing could depend on the Federal Reserve's actions, with projections of three quarter-point rate cuts in the first half of the year.

  6. Factors Influencing Mortgage Rates: Experts are monitoring various economic and financial indicators to gauge where mortgage rates are heading. These factors include consumer spending, GDP growth, inflation, bond yields, real estate data (such as housing starts), and mortgage demand. Economic conditions, both domestically and globally, can impact the direction of mortgage rates.

  7. Homebuyers' Considerations: The article concludes by highlighting the considerations for homebuyers in light of potential mortgage rate changes. It suggests that some buyers may choose to act now for certainty, while others may prefer to wait and assess market developments.

In summary, the dynamics of mortgage rates are intricately connected to economic indicators, Federal Reserve policies, and market sentiment. This comprehensive overview provides valuable insights into what homebuyers and investors might anticipate in the evolving landscape of mortgage rates in 2024.

How far will mortgage rates fall this year? Here's what some experts think (2024)


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