After hitting their highest levels in over 15 years in 2022, mortgage rates are expected to stabilize or even decline somewhat in 2024 according to many experts. However, interest rates will likely remain above the historically low levels seen during the past decade. Uncover the impact of geopolitical events and market sentiments on mortgage rate volatility. Gain clarity on fixed-rate versus adjustable-rate mortgages and their suitability in varying economic landscapes. Whether you’re a prospective homebuyer, investor, or industry professional, this guide equips you with essential knowledge to make informed decisions in the dynamic mortgage market of 2024. Here’s a look at where mortgage rates could be headed this year and what it means for homebuyers. 

Fed Policy Will Be a Key Factor in 2024 

The Federal Reserve’s monetary policy decisions will remain the most important driver determining mortgage rate moves this year. The Fed sharply raised its federal funds rate in 2022 and intends additional hikes in 2024 to bring down inflation. However, the pace of future Fed rate increases is expected to be more gradual. 

As the Fed eventually pauses or ends its tightening cycle, pressure on mortgage interest rates should ease. Most experts expect the Fed funds rate to peak around 5% sometime in mid-2024. Once it appears the Fed is close to hiking, we could see a ceiling on mortgage rates as well. 

Also important will be when the Fed starts cutting interest rates – likely not until 2024. Once rate cuts commence, falling inflation and easier monetary policy would provide stronger support for mortgage interest rates to decline. 

Forecasts for 2024 Mortgage Rates 

The average rate forecast from Freddie Mac, Fannie Mae, and the Mortgage Bankers Association calls for 30-year rates to remain elevated but decline modestly from 2022’s peak levels. 

– Freddie Mac sees rates averaging 6.2% throughout 2024. That’s down from 2022’s yearly average of nearly 6.9%. 

– The Mortgage Bankers Association has a similar forecast, projecting average rates of 6.3% for 2024.  

– Fannie Mae’s economists forecast average 30-year mortgage rates decreasing to 6.1% for 2024. 

So while another year of 6%-plus interest rates will continue to challenge affordability, especially for first-time buyers, a decline in average rates from 2022 would provide some relief. 

Refinancing Activity Expected to Rebound 

While still low by historical standards, a dip in mortgage rates is projected to spur at least some increase in refinances after 2022’s plunge. Total refit could rise about 25% to 30% this year per various forecasts. Homeowners who locked in rates above 6% the past couple of years have a strong incentive to refinancing if rates drop even half a point.  

However, as rates remain well above 2021’s record lows near 3%, traditional refinancing that significantly reduces monthly payments will be limited.  

Bottom Line for 2024 

We delve deep into the factors shaping borrowing costs this year. Explored how macroeconomic indicators such as inflation, Federal Reserve policies, number of applications and employment figures influence interest rates. Overall average mortgage rates are expected to remain well above 5% but should see some relief from 2022’s peak levels, perhaps averaging around 6% over the year. Exactly when rates might hit their ceiling is hard to pinpoint and largely depends on the eventual turning point for Fed policy and inflation data.   

Of course, with the economy and financial markets constantly evolving, anything is possible when it comes to interest rate moves. Staying flexible and ready to act at the right moment will be prudent whether you’re looking to buy a home or refinance this year. Paying close attention to expert forecasts and your budget and goals will help you successfully navigate still challenging but improving mortgage market conditions in 2024.