Mortgage Rates Drop Significantly From Last Year: What Homebuyers Should Expect Next
Mortgage rates are significantly lower than they were a year ago, based on the latest Freddie Mac data. Currently, the average 30-year fixed-rate mortgage is at 6.35%, while the average 15-year fixed-rate sits at 5.47%. “The 30-year rate remains unchanged from last week but is well below last year’s 7.12%,” writes Aarthi Swaminathan of MarketWatch.
What’s next for mortgage rates? Experts suggest not to expect drastic changes. Mortgage rates often shift ahead of any Federal Reserve decision, so potential Fed rate cuts may already be reflected in the current rates, says Jacob Channel, senior economist at LendingTree. He notes that a larger-than-expected 50-basis-point cut from the Fed could lead to lower mortgage rates, especially if inflation slows more than anticipated or if economic conditions worsen. Meanwhile, Greg McBride, chief financial analyst at Bankrate, emphasizes that the extent of any rate declines will depend on the economy’s health and the Fed’s response.
Could rates drop further? Lawrence Yun, chief economist at the National Association of Realtors, predicts mortgage rates will decrease to 6.2% by September, resulting in more home inventory and buyers. However, rates are unlikely to dip to 5% or lower, given the federal budget deficit. Danielle Hale, chief economist at Realtor.com, anticipates rates at around 6.3% by the end of 2024. Channel expects 30-year fixed mortgage rates to hover between 6% and 6.5% in September, with a possibility of reaching the 5% range if economic slowdowns and further Fed rate cuts occur.
While rates are expected to decline, some experts, like Holden Lewis from NerdWallet, refrain from pinpointing exact figures. Lewis notes that mortgage rates may drop in September as inflation eases and the Fed cuts short-term rates for the first time since 2020.
How does this affect homebuyers? September is a slower month for the housing market, so minor rate reductions might not attract many buyers, says Lewis. However, as rates decrease, they could set the stage for a stronger buying season in the spring and summer.
Even with modest rate drops in September, they’ll remain lower than they have been in the past year. This could boost home buying and refinancing activity, as prospective buyers and homeowners take advantage of better rates. That said, rates will likely still be higher than the ones many current homeowners locked in during the pandemic, meaning housing will remain costly and overall market activity may stay subdued, according to Channel.
Timing the market can be tricky. If you’re able to afford a mortgage at current rates and have found the right home, buying sooner rather than later might be wise, says Channel. But if you’re unsure about affordability or the rates aren’t attractive enough to trade in your current loan, it’s reasonable to wait.
