It may seem like ancient history, but there was a time in the recent past when mortgage interest rates were near record lows. At the height of the pandemic in 2020 and 2021, interest rates fell, providing buyers with a historic opportunity to secure a low mortgage rate. Existing homeowners were also able to take advantage, securing refinance rates of around 3% or less. But things have changed considerably since then.
In an attempt to curb high inflation, the Federal Reserve has since raised the benchmark interest rate several times, and it now sits in a range between 5.25% and 5.50%.. As a result, mortgage rates have increased to . And it’s possible that rates will rise soon. The Federal Reserve meets this week and will announce expected rate hikes on Wednesday. Although many expect rate hikes to be on hold for this cycle, they could increase before the end of 2023.
“We are watching for signs that the economy may not slow as expected,” Federal Reserve Chairman Jerome Powell said.. “We are prepared to raise rates further if appropriate and intend to keep policy at a restrictive level until we are confident that inflation is falling sustainably towards our target.”
So what does all this mean for mortgage rates – and when can consumers expect them to drop? Start by exploring your mortgage rate options here to see what rate you could qualify for.
When will mortgage rates drop?
Before mortgage interest rates fall, they will have to stop rising. Fortunately, that’s what many experts are predicting for this month’s Fed meeting. If they do, it will mark the second pause in increases in recent months (, either). This will have the effect of keeping mortgage rates relatively stable. However, it is more difficult to predict when they will decrease.
“As the Fed continues to fight inflation and moves closer to its 2% target, mortgage rates should respond positively to stabilization and begin to slowly decline in early 2024. My prediction is that we will see rates around by 6.5% in the first quarter of 2024 and by 5%. in the fourth quarter,” Brian Shahwan, vice president and mortgage banker at William Raveis Mortgage, said recently..
“Looking into the crystal ball, I see mortgage rates falling over the next six to 12 months, with some volatility accompanying this downward trend,” said Mike Hardy, managing partner at Churchill Mortgage.last month. “I think 30-year rates will be around 5.25% and 15-year rates will be around 4.875% a year from now.”
Mortgage rates depend on the actions (or lack of actions) of the Federal Reserve, which depends on progress toward reducing inflation. Until the fight against inflation is better controlled, the Fed is unlikely to ease rates and borrowing prices will likely remain high.
Don’t know what mortgage rate you could qualify for? Check it out here now.
Should you take out a home loan now?
Withhovering around 7%, many have chosen to stay on the sidelines. Compared to the much lower rates that could have been obtained just a few years ago, some feel that now is not the time to get a mortgage. For others, however, it may be. Here are two reasons why it may be worth taking action now:
- Prices could be even higher: Of course, current prices don’t match most buyers’ idea of a good deal. But if rates rise again this year or in 2024, today’s “high” rate of 7% could be tomorrow’s “low” alternative. Plan your mortgage application accordingly.
- You risk losing the house of your dreams: Many experts suggest a “date the rate, marry the house” approach. In other words, don’t be discouraged by today’s rates if suddenly hits the market. Buy it anyway and “date the price” for now. Mortgage rates will eventually drop at some point, at which point you may at the lower rate in force. But if you wait, you risk losing the opportunity to own your dream home.
Mortgage rates may be high now, but they may not stay that way in the long term. With a pause in rate hikes expected this week, the worst mortgage rate woes may be over. And while they’re unlikely to hit that 2020-2021 range anytime soon, that doesn’t mean buyers should automatically cut their stock now. There are several convincing elementsdo this. Start exploring your mortgage rate options today to learn more.