Mortgage rate forecast September 2024
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Mortgage rates will trend lower in September, but it will be an uneven journey.— Greg McBride, Bankrate Chief Financial Analyst
Mortgage rate predictions September 2024
If you’ve been holding out for lower mortgage rates, they’re finally here. The average 30-year mortgage rate began falling from 7 percent in mid-July, and landed just under 6.5 percent as of late August.
However, mortgage rates might not fall as precipitously this month, even with the likelihood of a Federal Reserve rate cut. With inflation cooler, the Fed is primed to cut rates at its next meeting ending Sept. 18 — the first reduction since the pandemic. While the Fed doesn’t directly set mortgage prices, it does influence them, and they’ve been trending down as cuts loom.
“Mortgage rates will trend lower in September, but it will be an uneven journey,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “Economic data, such as a weak jobs report, would spur more movement in mortgage rates than any response to a long-expected Fed interest rate cut.”
“Mortgage rates will bump around over the next few weeks, and I expect rates to be between 6.2 and 6.4 percent at the end of the year.,” says Lisa Sturtevant, chief economist at Bright MLS.
When will mortgage interest rates go down?
Mortgage rates have already started to pull back, with the 30-year loan averaging 6.48 percent as of Aug. 28, according to Bankrate’s weekly lender survey.
Still, rates might not come down as low as some homeowners hope, as forecasters previously baked in a September rate cut. In fourth quarter 2024 outlooks, Fannie Mae analysts anticipate 30-year rates at 6.4 percent, while the Mortgage Bankers Association predicts 6.5 percent. The National Association of Realtors projects 6.7 percent.
Current mortgage rate trends
The average interest rate on a 30-year fixed mortgage was 6.48 percent as of Aug. 28, according to Bankrate’s survey of lenders. Rates haven’t been this low since 2023.
Higher mortgage rates have kept homeowners locked in to lower-cost loans. Meanwhile, the median home price surged to a record $422,600 in July, according to the National Association of Realtors.
“Lower mortgage rates make it more affordable for buyers to purchase a home,” Sturtevant says. “But lower rates also make it easier for existing homeowners to sell. Nationwide, there is an average 3 percentage point gap between rates on new and existing mortgages. This rate gap has kept some homeowners from listing their home for sale. As rates fall, the rate gap is going to be less of an obstacle to sellers.”
“Continued improvements in mortgage rates are expected to drive more home sales,” says Skylar Olsen, chief economist at Zillow. “However, we are also entering a period of uncertainty for reasons that are often overlooked by econometric models: the behavior of buyers who may be holding out for further rate drops with growing confidence in an upcoming Fed rate cut, and the significant uncertainty surrounding the approaching elections. These factors may influence major decisions and have an impact on existing home sales as we near the end of the year.”
What to do if you’re getting a mortgage now
- Improve your credit score. A lower credit score won’t prevent you from getting a loan, but it can make all the difference between getting the lowest possible rate and more costly borrowing terms. The best mortgage rates go to borrowers with the highest credit scores, usually at least 740.
- Save up for a down payment. Putting more money down upfront can help you obtain a lower mortgage rate, and if you have 20 percent, you’ll avoid mortgage insurance, which adds costs to your loan. If you’re a first-time homebuyer and can’t cover a 20 percent down payment, there are loans, grants and programs that can help. The eligibility requirements vary by program, but are often based on factors like your income.
- Understand your debt-to-income ratio. Your debt-to-income (DTI) ratio compares how much money you owe to how much money you make, specifically your total monthly debt payments against your gross monthly income. Not sure how to figure out your DTI ratio? Bankrate has a calculator for that.
FAQ
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It might seem like a bank or lender are dictating mortgage terms, but in fact, mortgage rates are not directly set by any one entity. Instead, mortgage rates grow out of a complicated mix of economic factors. Lenders typically set their rates based on the return they need to make a profit after accounting for risks and costs.
The Federal Reserve doesn’t directly set mortgage rates, but it does set the overall tone. The closest proxy for mortgage rates is the 10-year Treasury yield. Historically, the typical 30-year mortgage rate was about 2 percentage points higher than the 10-year Treasury yield. In 2023, that “spread” was more like 3 percentage points. -
Deciding when to refinance is based on many factors. If rates have fallen since you originally took out your mortgage, refinancing might make sense. A refi can also be a good idea if you’ve improved your credit score and could lock in a lower rate or lower fees. A cash-out refinance can accomplish that as well, plus give you the funds to pay for a home renovation or other expenses.
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