October 2024 Mortgage Interest Rate Forecast: What to Expect

Homebuyers have faced significant challenges in recent years. Rising mortgage rates, surging home prices, and high inflation have combined to create a tough environment for those looking to purchase a home.

However, there are signs of change on the horizon. Recently, mortgage rates have started to ease, and a rate cut by the Federal Reserve in September may contribute to further improvements as we move into the fall season.

If you’re thinking about buying a home or refinancing soon, here’s a look at what to expect for mortgage rates during the upcoming months, based on expert insights.

Mortgage rates often fluctuate in anticipation of Federal Reserve decisions. With Fed Chairman Jerome Powell’s recent comments signaling possible rate cuts, mortgage rates have dropped in recent weeks. For instance, the average interest rate on 30-year mortgages has decreased from 6.72% at the beginning of August to an average of 6.15% currently.

Kevin Leibowitz, a mortgage broker at Grayton Mortgage, noted, “The market already priced it in. That’s why we’re seeing lower rates.” In September, the Fed cut its rate by 50 basis points, exceeding expectations of a 25 basis point reduction. While some of the cut was already anticipated, this larger-than-expected reduction may further influence mortgage rates.

Future Fed commentary will be crucial in shaping market expectations, as analysts aim to predict where rates may head next. Debra Shultz, vice president of lending at The Shultz Group at CrossCountry Mortgage, stated, “The key is the comments the Fed makes about future cuts. The market is always ahead of the Fed; meaning analysts are guessing where rates are headed, and the markets move accordingly.”

Experts generally believe that mortgage rates will continue to decline this fall. Shultz expressed optimism, predicting “high 5% rates in the next two to three weeks — max.” Currently, the Mortgage Bankers Association projects an average mortgage rate of 6.5% by the end of the year, whereas Fannie Mae forecasts slightly lower at 6.4%.

Darren Tooley, a loan officer and sales manager at Union Home Mortgage, shared, “As we get closer to the election, we should see rates continue to improve.” He acknowledged the predictions are uncertain, noting that key information influencing these rates has yet to emerge but believes a rate improvement of over 0.25% in the coming months is plausible.

Bigger-than-expected rate cuts or guidance suggesting more cuts could further decrease mortgage rates. Tooley emphasized that if the Fed were to cut rates by 50 basis points, it could result in a more rapid decline in mortgage rates.

While there is optimism about lower rates on the horizon, these forecasts come with caveats. Factors such as Federal Reserve actions, inflation, and unemployment could drastically alter the predictions, pushing rates in an unexpected direction.

Shultz cautioned consumers about making assumptions regarding rate trends. “If the market has dropped too fast based on what the Fed says, a rate cut can be considered underwhelming, and rates can actually go up,” she explained. Conversely, a smaller-than-expected cut accompanied by optimistic signals about future cuts could lead to price decreases.

In addition, the upcoming election cycle adds another layer of complexity, as job growth and inflation are critical indicators currently swaying mortgage rates. Tooley remarked, “The Fed’s decision on rate cuts, alongside jobs and inflation, will determine the direction of mortgage rates this fall.”

As homebuyers navigate this shifting landscape, it’s essential to stay informed about economic developments and how they could affect mortgage options. The market remains dynamic, and continued observation of these trends will be crucial for anyone looking to make home purchasing decisions in the coming months.