As homebuyers proceed cautiously and housing inventory decreases, the important question is: Will interest rates stay the same or go down? To comprehend the mortgage rates for 2024, we must examine the changes in the housing market in 2023. In this blog post, we will analyze predictions from various experts on mortgage rate trends, insights from 2023, current mortgage rates, and determine if 2024 is an ideal time for refinancing.
Home loan rates are determined by a combination of market conditions, such as inflation, economic growth, the Federal Reserve’s monetary policy, the housing market, mortgage-backed securities (MBSs), and the yield of the 10-year Treasury Bond. While some may believe that the Federal Reserve solely sets mortgage rates, it is important to note that their policy is just one of the many factors that influence these rates.
2023 a year of big changes:
Mortgage rates started descending at the end of the second quarter of 2023, according to Bankrate.com, “One key reason for the reversal: The Federal Reserve signaled it’s done raising interest rates and will begin lowering them this year. As a result, investors bid down 10-year Treasury yields, which serve as an informal benchmark for 30-year fixed mortgage rates.”
Another factor that influenced the decrease in mortgage rates was inflation. Sources confirm that in November, the Federal Reserve managed to reduce inflation by 3.1%, thereby alleviating the pressure on mortgage rates.
As inflation cools down and the Fed keeps lowering interest rates, mortgage rates may decrease slightly, possibly reaching 6% as the year progresses. However, our experts advise buyers not to expect rates as low as 3%.
Understanding Mortgage Rate Trends in 2024:
The Mortgage Bankers Association provides diverse insights into the trajectory of mortgage rates. While some anticipate rates reaching 7%, others foresee a gradual decline to 6-6.5% by spring.
As of January 2024, the average mortgage rate for a 30-year fixed is 7.12%, a significant increase from the 3.22% recorded in early 2022. Similarly, 15-year fixed rates have risen to 6.55%. In the current environment, adjustable-rate mortgages (ARMs) may offer more affordability, with the latest 5/1 ARM average at 6.04%, according to Inman.com.
Is 2024 a Good Time To Refinance?
According to Matt Vernon from Bank of America, the choice to refinance in 2024 is influenced by several factors, especially interest rates. If you obtained a mortgage during the historically low rates of 2020-2021, it might not be the best time to refinance in 2024, considering the current rates. While refinance applications are still low, the possibility of lower rates in uncertain economic conditions could impact the decision.
Consult with your local loan officer to learn about offerings that can help combat high-interest rates.
Current Mortgage Refinance Rates (January 2024):
For those considering refinancing, the average rates for January 2024 are as follows, according to Forbes.com:
- 30-year fixed: 7.21%
- 15-year fixed: 6.75%
- 30-year jumbo: 7.32%
- 5/1 ARM: 5.96%
What Do Current Rates Mean for Refinancing in 2024?
While refinance activity has shown signs of life amid declining rates, overall volume remains historically low.
How To Shop For the Best Mortgage Rate:
To secure the best mortgage rate, prospective buyers should:
1. Keep a close eye on changing rates.
2. Check and improve their credit score to enhance creditworthiness.
3. Shop around and compare offers from multiple lenders to find the most favorable deal.
PRO TIP:
When comparing home loans, it’s important to ask for the APR (Annual Percentage Rate). This way, you can accurately assess the cost of each loan and make an informed decision.
Final thoughts:
The increase in mortgage rates, which hasn’t been seen since 2000, has had a significant impact on the U.S. housing market. The Federal Reserve’s response to inflation by raising interest rates is a key factor. Insights from experts provide perspectives on these challenges. Despite the uncertainty, there is still a possibility of rate cuts.
As mortgage rates continue to evolve in 2024, it’s crucial to stay informed and consider individual circumstances. Whether you’re thinking about a new mortgage or considering refinancing, understanding the current market dynamics is essential for making informed decisions in the ever-changing real estate environment.
