Mortgage rate forecasts say that there might be a drop in 2024, but it is unlikely to happen in March as the economy has not slowed down enough for the decrease to happen. When the economy starts growing strongly and more jobs are available, prices usually rise, making the interest rates go up. This happened in February, and it is not likely to change in March.
When Will Mortage Fall?
According to a weekly survey done by Freddie Mac, the rates increased in February as the average rate on a 30-year mortgage was reported to be at 6.78%, up from 6.64% reported in January.
The economic data released in February showed that the economy was doing good in the last part of 2023 and in January 2024. It was reported that the economy had grown by 3.2% annually in the fourth quarter of 2023.
In January, the economy helped create 353,000 jobs, and the core consumer price index or the core CPI also increased, showing signs of strong economic growth which led to an increase in mortgage rates in February.
Mortgage rates are not expected to decrease unless there are clear signs of the economy slowing down consistently for a few months. These signs are unlikely to appear in March, despite the Federal Reserve’s efforts over the past two years.
To reduce inflation, the Federal Reserve raised the overnight federal funds rate by 5.25 percentage points from March 2022 to July 2023, causing inflation to decrease, with the core CPI reducing from 6.6% in September 2022 to 3.9% in January.
For inflation to reach the 2% target of the Federal Reserve, the rate needs to go down more. The recent comments from Christopher J. Waller, Fed governor said that the Federal Reserve is in no rush to introduce rate cuts anytime soon.
Waller, part of the Fed’s rate-setting committee, said in his speech that the central bank needs to confirm that inflation is truly decreasing and is therefore, he believes there is no need to hurry to start lowering interest rates to get monetary policy back to normal.
Waller’s speech was clear, showing that the Fed will not be cutting the federal funds rate in its upcoming March 20 meeting, meaning there is little chance for mortgage rates to decrease this March.
Waller mentioned that he had predicted the Fed lowering short-term rates later this year, however, he stressed the importance of waiting as easing policy at the right time is less risky than acting too rashly and potentially undoing progress done by the Federal Reserve on inflation.
In late 2023, mortgage rates dropped for the first time in a while as the yields on the 10-year Treasury, which affects 30-year fixed mortgage rates, went down. Even though the Federal Reserve does not directly set the mortgage rates, changes in the federal funds rate can affect how much consumers pay for loans, including mortgages.
Mortgage Rate Forecasts
Fannie Mae, the Mortgage Bankers Association, and the National Association of Realtors have said that they expect the mortgage rates to slowly drop in 2024, reaching 6% by the last quarter. However, if the Fed maintains the federal funds rate until mid-year, the mortgage rate forecasts might be adjusted to a higher number.
Fannie Mae, the Mortgage Bankers Association, and the National Association of Realtors expect mortgage rates to gradually decrease throughout 2024. In the first quarter of 2024, Fannie Mae forecasts 6.5%, the Mortgage Bankers Association predicts 6.9%, and the National Association of Realtors expects 6.8%. By the fourth quarter of 2024, rates are supposed to decrease more: Fannie Mae predicts 5.9%, the Mortgage Bankers Association at 6.1%, and the National Association of Realtors also at 6.1%.
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