2024 Mortgage Rate Forecast - Exploring 3 Possible Scenarios and Their Impact

Aquib Nawab


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1. Background

The Federal Reserve's near-zero rates briefly lowered mortgage rates below 3% during the pandemic's onset. Yet, in 2022 and 2023, inflation and Fed rate hikes led to a steady climb in mortgage rates.

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2. Recent Trends

In the week ending October 26, 2023, 30-year fixed-rate mortgages averaged 7.79%. Just a few weeks later, for the week ending December 7, 2023, the average fell to 7.03%, according to data from Freddie Mac.

3. Mortgage Rate Scenarios

In 2024, three possible scenarios for mortgage rates emerge, rates could potentially fall to around 6.5%, decline further to approximately 6%, or remain stable or even rise.

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4. Scenario 1 - Rates Around 6.5%

In one scenario, 2024 may begin with stable rates, followed by a 0.5% decline to 6.5% for 30-year mortgages by mid-year. Experts like Peter Idziak predict this decline due to expected cooling of inflation and labor market weakness.

5. Scenario 2 - Rates Around 6%

Another scenario foresees a significant rate drop, potentially to about 6% for 30-year fixed-rate mortgages. Russ Krivor and Jerry Koors cite a cooling economy, reduced consumer confidence, and slower rent growth as potential factors driving this decline.

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6. Scenario 3 - Steady or Rising Rates

Despite expectations of declining mortgage rates in 2024, there's a chance they stay steady or rise if inflation worsens. CME FedWatch Tool displays rate change probabilities, with experts speculating on potential Fed rate cut delays.

7. Probability of Rate Changes

CME FedWatch Tool suggests a 53.5% chance of rate stability in March 2024, with only a 0.1% probability of rates remaining the same by December 2024, potentially leading to the Fed considering delaying rate cuts, as suggested by experts like Peter Idziak.

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8. Expectations for 2024

Experts generally foresee modest rate drops in 2024, suggesting that homebuyers may not experience the sub-3% rates, which was seen during the pandemic.

9. Factors to Consider

Homebuyers are encouraged to consider factors within their control, such as shopping around for the best rates and finding a home that fits their budget.

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