Mortgage rate forecast December 2024

Mortgage rate predictions December 2024

Mortgage rates are unlikely to decline dramatically in December, says Greg McBride, CFA, Bankrate’s chief financial analyst. Blame the combination of a still-strong economy, inflation fears and growing concerns about a rising federal deficit.

“There’s a lot of concern about the inflation outlook currently reflected in long-term bond yields and mortgage rates,” McBride says. “There is room for mortgage rates to move lower in December if inflation pressures ease or if worries about an inflation resurgence in 2025 dissipate.”

So much for hopes that mortgage rates were headed back into the 5 percent range. The average 30-year mortgage rate began declining from 7 percent in mid-July, fell to as low as 6.2 percent in September, then quickly reversed course, tracking back above 7 percent before settling in at 6.94 percent as of Nov. 26, according to Bankrate’s weekly lender survey.

Then there’s the Federal Reserve, which doesn’t directly set mortgage prices, but does influence them. The Fed cut its benchmark rate in September, issued another cut in November and will meet once more before the end of the year.

Will mortgage interest rates go down again?

Was the dip just a head fake? With indicators such as hiring and economic growth showing signs of strength, Fannie Mae and the Mortgage Bankers Association predict 30-year rates will decrease to 6.6 percent by the end of the year. Not too long ago, Fannie expected rates to fall all the way to 6 percent in 2024.

“We’re not expecting rates to drop too much further from where they are today,” says Mike Fratantoni, chief economist at the Mortgage Bankers Association.

“I don’t think we’re going to see mortgage rates as fall as everyone hoped,” says Lisa Sturtevant, chief economist at Bright MLS, a large listing service in the Mid-Atlantic region. “It feels like rates are going to be well in the 6s. But that might not be as big an obstacle as we might have thought. There’s this anchoring going on where buyers and sellers are getting used to 7.”

Current mortgage rate trends

Higher mortgage rates have kept homeowners locked in to lower-cost loans. Meanwhile, the median home price surged to $407,200 in October, the highest number for that month on record, according to the National Association of Realtors.

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 780.
• 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

• How are mortgage rates determined?

  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. That “spread” has been closer to 3 percentage points as of late.

• When should I refinance my mortgage?

  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. A cash-out refinance can accomplish that as well, plus give you the funds to pay for a home renovation or other expenses.