Mortgage rate predictions August 2024
If you’ve been holding out for lower mortgage rates, this month could be the time to strike. Inflation has cooled — a shift that pushed 30-year rates below 7 percent in July — and mortgage investors anticipate a Federal Reserve rate cut as soon as September. (The central bank left rates unchanged at its latest meeting this week.)
While the Fed doesn’t directly set mortgage rates, it does influence them, and they’ve been trending down as a cut seems to grow nearer.
“With an expected Fed shift to rate-cutting as soon as September, the bias is toward lower mortgage rates,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “A quarter-point September rate cut is largely reflected already, but further clarity on how much and how soon after the Fed will cut rates will propel mortgage rates down — but it is unclear if we’ll see that unfold in August. Concerns about fiscal deficits and the national debt will counteract some of the declines.”
“Expectations are still high for a Federal Reserve interest rate cut in September, so it is likely that we will see mortgage rates decline further in August and into the fall,” 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 6.86 percent as of July 31, according to Bankrate’s weekly lender survey.
Still, rates might not fall as far 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 6.7 percent, while the Mortgage Bankers Association predicts 6.6 percent. The National Association of Realtors projects 6.7 percent.
However rates land, lower borrowing costs tend to push homebuyers to act. With more buyers on the market and too-few homes for sale, home prices have nowhere to go but up.
“The market anticipates at least two rate cuts before the end of 2024, which is down markedly from the six projected in mid-January of this year,” says Jack Macdowell, chief investment officer at Palisades Group. “We expect any drop in mortgage rates to cause further pressure on housing price inflation due to the pent-up demand that would be released into an undersupplied market.”
Current mortgage rate trends
The average interest rate on a 30-year fixed mortgage was 6.86 percent as of July 31, according to Bankrate’s survey of lenders. During the first half of 2024, the 30-year rate was at its lowest in January, at 6.84 percent, and at its highest in May, at 7.39 percent.
Higher mortgage rates have kept homeowners locked in to lower-cost loans. Meanwhile, the median home price surged to a record $426,900 in June, according to the National Association of Realtors.
“Despite rising inventories of homes for sale, home sales remain muted for both existing and newly built homes as buyers remain wary of the direction of mortgage rates and housing market trends, especially in markets impacted by the surging cost of home insurance and taxes,” says Selma Hepp, chief economist at CoreLogic. “But if the Federal Reserve moves with the first rate cut in September, it could help drive mortgage rates lower and instill some much-needed boost to potential homebuyers.”
Bankrate’s weekly mortgage rate averages differ slightly from the statistics reported by Freddie Mac, the government-sponsored enterprise that buys mortgages and packages them as securities. Bankrate’s rates tend to be higher because they include origination points and other costs, while Freddie Mac removes those figures and reports them separately. However, both Bankrate and Freddie Mac report similar overall trends in mortgage rates.
What to do if you’re getting a mortgage now
Mortgage rates are near generational highs, but the basic advice for getting a mortgage applies no matter the economy or market:
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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Written byJeff OstrowskiPrincipal writer, Home Lending
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