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Last year, it seemed like rates would never stop climbing, with 30-year mortgage rates reaching a more than two-decade high in October 2023. Now rates are much lower, but they’re still relatively high compared to pre-pandemic levels.
The good news is that mortgage rates should go down in 2024, with some forecasts predicting they’ll drop close to 6% by the end of the year. The not-so-good news is that as rates go down, houses are probably going to get more expensive.
The latest housing market predictions for 2024 see home prices rising this year as lower mortgage rates drive an increase in homebuying demand. High mortgage rates have kept a lot of would-be buyers out of the market over the past couple of years. Once rates fall, all that pent-up demand is going to be unleashed on a market that doesn’t have anywhere near enough inventory to meet it.
This will push home prices up. But that doesn’t necessarily mean it will be impossible to buy in 2024, or that prices will spike dramatically everywhere. There will still be opportunities for many buyers to carve out some affordability in this market.
For cash-strapped first-timers who are hoping to buy in 2024, things like down payment assistance and first-time homebuyer loans can make homeownership more affordable, even as prices rise.
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Mortgage Calculator
Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.
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Your estimated monthly payment
- Paying a 25% higher down payment would save you $8,916.08 on interest charges
- Lowering the interest rate by 1% would save you $51,562.03
- Paying an additional $500 each month would reduce the loan length by 146 months
Click “More details” for tips on how to save money on your mortgage in the long run.
30-year Fixed Mortgage Rates
The average 30-year fixed mortgage rate was 6.66% last week, according to Freddie Mac. This is a four-basis-point increase from the previous week.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.
The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates.
15-year Fixed Mortgage Rates
Last week, average 15-year mortgage rates were 5.87%, a two-basis-point decrease from the previous week, according to Freddie Mac data.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.
When Will Mortgage Rates Go Down?
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Rates also increased dramatically last year, though they’ve been trending back down in recent months.
As inflation comes down, mortgage rates will recede as well. Most major forecasts expect rates to trend down throughout 2024.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
How Do Fed Rate Hikes Affect Mortgages?
The Federal Reserve increased the federal funds rate a lot last year to try to slow economic growth and get inflation under control. Inflation has come down a lot in response to this, though it’s still a little bit above the Fed’s target rate of 2%.
Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy.
Fed hikes have pushed mortgage rates up over the last two years. But the Fed has indicated that it’s likely done hiking rates and could start cutting in 2024. Once the Fed cuts rates, mortgage rates should fall even further.
Source: businessinsider.com