The historic spike in mortgage rates during 2023 caused much anxiety among potential homeowners. However, the 2024 mortgage rate forecast might be more favorable and should be a reason for optimism as we move into the new year.
What Factors Affect Mortgage Rates?
From an outsider's perspective, the conditions determining mortgage rates can seem confusing (perhaps even arbitrary). In reality, the Federal Reserve does not directly control mortgage rates – however, its actions set the overall tone for borrowing costs. Note that the Fed bases its assessments on several factors, including labor market conditions, financial and international developments, as well as inflation pressures and expectations.
Inflation is also important as it influences how lenders set their mortgage rates. Another significant factor is that during periods of economic growth, consumers are more likely to borrow, resulting in higher interest rates. Other noteworthy influences over mortgage rates include bond market conditions, which indirectly affect how much lenders charge for mortgages. Likewise, housing market conditions have a major role in mortgage rates. For example, whenever there is a decrease in demand for homes, there is typically a corresponding drop in mortgage rates.
The Current State of Mortgage Rates: Are they Trending Down?
In the last few years, homebuyers experienced a rollercoaster of emotions watching mortgage rates hit valley lows and mountain highs. At the height of the pandemic, mortgage rates plunged to below 3% and didn’t rise above 5% until April 2022. However, rates didn’t stop climbing and eventually hit their highest level in more than two decades after the Fed's rate hikes. As of December 13th, the national average for 30-year mortgages was 7.21 %.
Nevertheless, despite these large spikes in mortgage rates, there are signs of receding inflation pressures. In October, rates ascended as high as 7.79% but eventually dropped. In fact, the average 30-year fixed mortgage rate fell to 6.95% for the week ending December 14th, making it the first time that rates have gone below 7% since August.
Predicting Mortgage Rates in 2024
With inflation gradually dissipating and the economy poised to enter into a recession, some experts predict that mortgage rates will continue to decrease into the 6% range in 2024. Nevertheless, predicting future montage rates can be tricky due to various variables. Interest rates are also at the mercy of many factors, making them notoriously volatile, sometimes changing in any given week.
Other germane factors that can and will influence mortgage rates are national events like the upcoming presidential election as well as geopolitical happenings such as instability in foreign countries and markets. Additionally, policy decisions by financial authorities and economic conditions can sway mortgage rates up or down. Ultimately, no prediction of mortgage rates for 2024 and beyond is ever perfect, emphasizing the importance of partnering with an experienced retailer who can help you navigate this uncertainty with greater confidence.
Minimize Uncertainty with NMC Realty Group
While mortgage rates are trending downward, breathing life into a stagnating housing market, the rates, at the end of the day, are still high. As such, whether you plan to buy or sell in 2024, you should consult the team of experts at NMC Realty Group.