Why Are Mortgage Rates So High, and How Long Will They Stay Up? (2024)

FAQs

How long will mortgage rates stay elevated? ›

The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025. However, recent economic developments have led some forecasters to believe that rates will remain elevated at around 7% for the remainder of this year.

Mortgage rates moved up as the Fed bumped the target fed funds rate higher. The Fed projected rate cuts to begin in 2024. However, lingering inflation, still above 3%, has tempered rate cut expectations for now. Mortgage rates trended higher in 2024's opening months, only recently dropping below 7%.

Interest rates have held steady since July 2023.

The federal funds target rate has remained at 5.25% to 5.5% since July 2023. To combat inflation, the rate was raised 11 times between March 2022 and July 2023. Inflation has receded, but the Fed has signaled it wants more positive data before pulling the trigger.

Buying a home when mortgage rates are high can drive up your monthly payments, but waiting for rates to fall before buying a home comes with its downsides, too. Even if mortgage rates are high when you buy a home, you can always refinance down the line if rates drop.

Economists and housing market experts agree that mortgage rates will fall over the next several years, but not below 3%.

Trading Economics offers a more optimistic outlook, predicting a rise to 5% in 2023 before falling to 4.25% in 2024 and 3.25% in 2025. This forecast is supported by Morningstar's analysis, which projects rates between 3.75% and 4%.

Mortgage rate predictions 2024

The MBA's forecast suggests that 30-year mortgage rates will fall into the 6.5% to 6.9% range throughout the rest of 2024, and NAR is predicting a similar trajectory. But Fannie Mae thinks rates could stay in the low 7% range this year.

The Federal Reserve on Wednesday left its benchmark interest rate unchanged and penciled in only one rate cut in 2024 as policymakers await more evidence that U.S. inflation is cooling in earnest.

Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."

Ideally, you'll be able to buy when both interest rates and home prices are low. If that's not possible, calculate both the short- and long-term costs of a lower interest rate versus a lower purchase price.

Will 2024 be a good year to buy a house? ›

The combination of high mortgage rates, steep home prices and low inventory levels are lining up to make the 2024 housing market a challenging one for both buyers and sellers. But rates have cooled a bit — if that continues throughout the year, as some experts predict, then market activity should heat up in response.

When is a good time to wait? Rising mortgage interest rates often mean a smaller pool of buyers who can afford the price you want. Selling a home isn't free, so if you can't maximize your price, you might want to wait. If you recently refinanced your mortgage, it may not make financial sense to sell just yet.

Mortgage rate predictions 2024

The MBA's forecast suggests that 30-year mortgage rates will fall into the 6.5% to 6.9% range throughout the rest of 2024, and NAR is predicting a similar trajectory. But Fannie Mae thinks rates could stay in the low 7% range this year.

There are no sources for officially projected interest rates in five years, but the Mortgage Bankers Association does predict rates on 30-year mortgages will drop to 5.9% by the end of 2025. Fannie Mae predicts a 6.6% rate.

Federal Reserve now expects to cut interest rates just once in 2024 amid sticky inflation. The Federal Reserve on Wednesday left its benchmark interest rate unchanged and penciled in only one rate cut in 2024 as policymakers await more evidence that U.S. inflation is cooling in earnest.

But economists at the World Bank expect that inflation will moderate over the next two years and by the end of 2026 interest rates will come down along with it, which experts say will buoy the housing market.