What’s the short-term outlook for mortgage rates? Experts weigh in.

Mortgage rates hover around 7%, impacting buying and selling, but experts predict a decline by year's end - Photo by UnSplash +

Rates continue to drift lower

Over the last several weeks the average 30-year mortgage rate has bounced slightly above and slightly below the 7% level. That’s discouraged some people from buying and others from selling since they would be replacing their low interest rate mortgage with a more expensive one.

Shmuel Shayowitz, president and chief lending officer at Approved Funding, thinks rates will remain in a narrow range but will trend lower for the rest of 2024.

“I anticipate that mortgage rates will be at least 25 basis points lower than current levels before the end of the year,” Shayowitz told ConsumerAffairs. “The Federal Reserve is waiting for convincing data to show that inflation has eased, and I believe we will start seeing this with the June CPI readings.”

Shayowitz says the two biggest inflation drivers have been shelter and car insurance. Elsewhere, he sees prices easing. Seamus Nally, CEO, of TurboTenant, agrees that mortgage rates should start to ease by the end of 2024.

“It is highly probable that the Fed will cut rates at one of the later meetings in the year, and when that happens, mortgage rate directions will follow,” he told us. “Typically mortgage rates tend to follow the decisions made by the Fed because that determines the market and interest power.”

Omer Reiner, president of real estate investment company FL Cash Home Buyers, thinks an active summer real estate market will keep rates close to current levels. 

“However, by the end of the year, I would expect that if the economy stays steady or ramps up, mortgages are likely to dip,” Reiner said. “A big dip? I wouldn’t expect anything sizable, but a steady decrease is more than 50-50.”

Beyond 2024

Looking beyond the end of 2024, economists at the World Bank see “substantial” cuts in mortgage rates by the end of 2026. Their report bases that prediction on an expected decline in inflation that has pushed up borrowing costs. But before then, the report said there might not be much moderation in interest rates.

“Given continued inflationary pressures, central banks in both advanced economies and emerging market and developing economies (EMDEs) will likely remain cautious in easing monetary policy,” the report said. “As such, average benchmark policy interest rates over the next few years are expected to remain about double the 2000-19 average.”

But there were signs this week that there could be some improvement in rates in the near term. After the better-than-expected May Consumer Price Index (CPI), the Federal Reserve said there could be one rate cut over the next six months. And mortgage rates have already responded.

“Mortgage rates continued to fall back this week as incoming data suggests the economy is cooling to a more sustainable level of growth,” said Sam Khater, Freddie Mac’s chief economist.

“Top-line inflation numbers were flat but shelter inflation, which measures rent and homeownership costs, increased showing that housing affordability continues to be an ongoing impediment for buyers on the house hunt.”

Latest rates

The 30-year fixed rate mortgage (FRM) averaged 6.95% as of June 13, 2024, down from last week when it averaged 6.99%. A year ago at this time, the 30-year FRM averaged 6.69%.

The 15-year FRM averaged 6.17%, down from last week when it averaged 6.29%. A year ago at this time, the 15-year FRM averaged 6.10%.

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