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.
Mortgage Rates and Influencing Factors
Mortgage rates are influenced by many factors, such as the supply and demand for housing, the economic growth, the inflation, the monetary policy of the Federal Reserve, and the global market conditions. In 2023, mortgage rates soared to their highest levels in decades, as the Fed raised its benchmark interest rate six times to combat rising inflation and overheating economy.
The average 30-year fixed mortgage rate reached 8.45% in October 2023, considered to be the highest level for 30-year rates since 2000. Thereafter, in less than two months since October's historic high-water mark, 30-year mortgage rates dropped back down to about 7%.
Now, the Fed has paused its rate hikes, as inflation has started to moderate and economic growth has slowed down. The Fed also signaled that it expects to cut its interest rate three times in 2024, as it sees a more balanced outlook for the economy. This has led to a drop in mortgage rates, which fell to 6.60% in January 2024.
But don't expect mortgage rates to fall much further in the near future. Most forecasts agree that mortgage rates will remain above 7% for most of 2024, as the Fed will still be cautious about cutting rates too quickly or too deeply.
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.
Implications for Homebuyers and Homeowners
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.