If you are a prospective homebuyer or homeowner looking to refinance your mortgage, you might be wondering when will mortgage rates go down to 3% in the US. The answer is not anytime soon, according to most experts and forecasts. In fact, mortgage rates are expected to stay above 6% for most of 2024, and only gradually decline by the end of the year.
Although, nobody has a crystal ball, we can examine the factors influencing mortgage rates and see what experts are predicting. Here's a breakdown to help you navigate the current climate, along with some recent data from the Primary Mortgage Market Survey® conducted on June 6th, 2024:
- Current 30-year fixed rate mortgage (FRM) average: 6.99%
- Change over the past week: -0.04% (down slightly)
- Change over the past year: 0.28% (upward trend)
- 4-week average rate: 7%
- 52-week average rate: 7.01%
- 52-week range: 6.6% to 7.79%
As you can see, rates have been hovering around the 7% mark for the past month, with a slight dip this past week. This data reflects the current economic climate and the Federal Reserve's recent interest rate hikes.
The Federal Reserve plays a key role in setting interest rates, which in turn affect mortgage rates. In an effort to combat inflation, the Fed has been raising rates since late 2023. This, unsurprisingly, pushes mortgage rates up as well. So, when will the Fed ease off the gas?
When Will Mortgage Rates Go Down to 3%: Is it Possible?
Most economists believe the Fed will likely slow down, or even cut, rates later in 2024. However, they caution that these cuts will likely be modest and may not bring rates all the way back down to 3%.
Inflation is another major player. If inflation starts to cool down and the Fed feels confident it's under control, they'll be more comfortable lowering rates. The recent economic data shows some signs of inflation peaking, but it's still too early to say for sure.
The housing market itself also plays a part. If home prices start to decline due to rising interest rates, it could incentivize the Fed to lower rates again to stimulate the market. However, a sustained drop in home prices seems unlikely at this point.
Real estate and mortgage professionals are offering a variety of forecasts. Some predict rates could fall back to the 5% range by the end of 2024, assuming the Fed cuts rates as expected. Others are more cautious, suggesting rates might settle somewhere in the 6% to 7% range for the foreseeable future.
Projections from Different Sources
- Goldman Sachs Research: The analysts expect the 30-year fixed mortgage rate to be 7.6% at the end of 2023, and 7.1% at the end of 2024.
- Forbes Advisor: The experts predict that mortgage rates will average 7.5% in the first quarter of 2024, dropping to 6.9% in the second quarter, and falling to 6.5% by the end of the year.
- U.S. News: The publication forecasts that mortgage rates will continue to fall to 6.3% by the end of 2024.
- Mortgage Bankers Association: The trade group projects that mortgage rates will slide to 6.1% by the end of 2024.
- Fannie Mae: The government-sponsored enterprise expects that mortgage rates will dip to 6.5% by the end of 2024.
- Bright MLS: The real estate listing service anticipates that mortgage rates will decline to 6.2% by the end of 2024.
As you can see, none of these forecasts expect mortgage rates to go down to 3% in 2024. In fact, that level of mortgage rates has not been seen since early 2020, when the Covid-19 pandemic triggered a historic plunge in interest rates and a surge in refinancing activity.
So what does this mean for you as a homebuyer or homeowner? It means that you should not wait for mortgage rates to drop significantly before making your move. If you are ready to buy a home or refinance your existing mortgage, you should act sooner rather than later, as mortgage rates are still relatively low compared to historical averages. You should also shop around for the best mortgage rate and terms for your situation, as different lenders may offer different deals.
Mortgage rates are unpredictable and can change quickly depending on various factors. Therefore, it is important to keep an eye on the market trends and news, and consult with a trusted mortgage professional who can help you navigate the process and find the best option for you.
The Bottom Line: Patience is Key
While a return to 3% rates might be a long shot in the near future, there's still hope for aspiring homeowners. If you're patient and do your research, you can find a mortgage that fits your budget even in today's market. Here are some tips:
- Shop around: Get quotes from multiple lenders to compare rates and terms.
- Consider a shorter loan term: A 15-year mortgage will typically have a lower interest rate than a 30-year loan.
- Improve your credit score: A higher credit score can qualify you for a better interest rate.
Remember, buying a home is a marathon, not a sprint. By being prepared and staying informed, you can navigate the current market and find the perfect place to call your own.
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