How far will mortgage rates fall when the Fed cuts rates? Here's what experts say (2024)

We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms.

MoneyWatch: Managing Your Money

How far will mortgage rates fall when the Fed cuts rates? Here's what experts say (2)

While more stable over the past nine months, the economy was highly volatile from 2020 through the first half of 2023.

After the pandemic hit, the Fed dropped the fed funds rate to zero and demand surged in the housing market causing home values to skyrocket. Then, inflation began to run away and the Fed hiked rates 11 times. Meanwhile, the average 30-year fixed mortgage interest rate went from 2.8% in late 2021 up to a 22-year high of 7.79% in October 2023.

Since December, mortgage rates have been more stable, fluctuating between 6.5 and 7%. However, many are now wondering if rumored Fed cuts will change that.

"As the market gains more certainty and as inflation curbs, it is very likely that there will be rate cuts this year," says Scott Haymore, senior vice president and head of mortgage capital markets and product management at TD Bank. "Currently, Fed Funds futures contracts have three rate cuts built in starting in the second half of this year," he says.

If Fed rate cuts do happen as many expect, how far can you expect mortgage ratesto drop, if at all? We asked some experts for their rate predictions.

See how low of a mortgage interest rate you could secure here now.

How far will mortgage rates fall when the Fed cuts rates?

Here's where three experts predict mortgage rates are heading:

  • Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
  • Hold steady through 2024: Afifa Saburi, a capital markets analyst for Veterans United Home Loans, doesn't think rates are going to drop much this year. "Mortgage rates won't fall much from where they are today because the rate cuts that the Fed has penciled in are already priced in by the markets. This means that almost all of the rate relief that we would see from rate cuts is already here," Saburi explains.
  • Hold steady through mid-2025: Jeremy Schachter, branch manager at Fairway Independent Mortgage Company, says he expects rates will stay in the higher 6% range and won't fall much in 2024 or even early to mid-2025. "With goals of the Federal Reserve to get inflation around the 2% mark, I don't expect the Feds to lower rates until September or later in 2024," Schachter says. "Unfortunately, we still have to have a bit more pain in the economy with higher unemployment to see the Federal Reserve lower rates."

The bottom line? While rates may drop modestly, we likely won't be getting back to the 3 to 5% rates that were the norm from 2010 to 2020 in the upcoming year.

Learn more about today's mortgage rates online now.

Should you wait to buy a home?

If you find a great home and the financing fits into your budget, experts say you typically don't want to wait.

"The best advice is still: When you find a home you love inside your budget, buy it. Mortgage rates are unpredictable but, right now, home values are not," says Dan Green, chief executive officer at If rates do drop, you can always refinance to secure a lower ratebut you won't always be able to buy a particular home.

You should also consider the opportunity cost of waiting. "On average home appreciation is between 4 and 5% each year. If you decide to hold off until 2025, how much will that home be worth vs. purchasing it now?" asks Schachter. He explains that if you decide to wait and time the market, a home that is worth $500,000 now could have appreciated $25,000 in 2025 (a 5% increase). "The adage, buy the home, date the rate is a perfect example of this scenario," Schachter added.

A drop in rates also often causes more buyers to enter the market which drives up home prices. "I believe we will see rate cuts come in the fall if at all this year. Along with that, you will see buyers come back to the fray and it will make competition even harder in a housing shortage-dominated market. Yes, rates will be lower but prices may be much higher," predicts Ralph DiBugnara, president of Home Qualified and senior vice president at Cardinal Financial.

How far will mortgage rates fall when the Fed cuts rates? Here's what experts say (2024)


How far will mortgage rates fall when the Fed cuts rates? Here's what experts say? ›

How far will mortgage rates fall when the Fed cuts rates? Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore.

Will mortgage rates drop if the Fed cuts rates? ›

With the expectation that the Fed is still planning to cut rates at some point in 2024, it could put downward pressure on mortgage rates. "The Fed has held that their goal is to reduce rates in 2024 provided the market allows for it," says White.

Are mortgage interest rates expected to go down 2024? ›

Mortgage rates are likely to trend down in 2024. Depending on which forecast you look at for housing market predictions in 2024, 30-year mortgage rates could end up somewhere between 6.1% and 6.4% by the end of the year.

How low will mortgage rates go in 2025? ›

The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. Meanwhile, Wells Fargo's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.

Are mortgage rates expected to go down? ›

When Will Mortgage Rates Go Down? Mortgage rates are expected to decline when the Federal Open Market Committee cuts the benchmark interest rate, which is likely to happen in the second half of 2024. But as long as inflation runs hotter than the Fed would like, rates will remain elevated at their current levels.

Will interest rates drop below 6? ›

Mortgage rates will drop below 6%

Mortgage rates could continue to trend downward this year, especially once the Fed starts cutting the federal funds rate. "Mortgage rates will go down in 2024.

What Fed rate cuts mean for home buyers in 2024? ›

Mortgage rates will fall

Interest rate cuts from the Fed typically put downward pressure on mortgage rates. By the end of the year, mortgage lenders could be offering average rates below 6% on 30-year fixed-rate mortgages, according to Fannie Mae.

How high could mortgage rates go by 2025? ›

Mortgage rates are going to stay above 6% through 2025, according to estimates from Goldman Sachs.

Will mortgage rates ever be 3 again? ›

After all, higher rates equate to higher minimum payments. So, you may be wondering if, and when, mortgage rates might fall to 3% or lower again - and whether or not it's worth waiting to buy a home until they do. Although rates could fall to 3% again one day, it's not likely to happen any time soon.

Will my mortgage go up in 2024? ›

Inflation is anticipated to keep falling in 2024 and may reach the BoE's 2% target earlier than expected. As inflation has declined faster than expected this year, the BoE could start cutting the base rate in 2024 and possibly fall to 4% by the end of next year, according to data from private bank Berenberg.

Will mortgage rates ever drop below 5 again? ›

The good news is that inflation is cooling, and many experts expect interest rates to move in a downward direction in 2024. Then again, a two-point drop would be significant, and even if rates fall, they're not likely to get down to 5% within the next year.

What is the mortgage rate forecast for 2026? ›

The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.

What will the mortgage rate be in late 2024? ›

While McBride had expected mortgage rates to fall to 5.75 percent by late 2024, the new economic reality means they're likely to hover in the range of 6.25 percent to 6.4 percent by the end of the year, he says.

How many times can I refinance my home? ›

Legally speaking, there's no limit to how many times you can refinance your mortgage, so you can refinance as often as it makes financial sense for you. Depending on your lender and the type of loan, though, you might encounter a waiting period — also called a seasoning requirement.

What is prime rate today? ›

The current Bank of America, N.A. prime rate is 8.50% (rate effective as of July 27, 2023).

What is the interest rate today? ›

Current mortgage and refinance rates
ProductInterest RateAPR
20-year fixed-rate7.043%7.148%
15-year fixed-rate6.381%6.518%
10-year fixed-rate6.178%6.376%
7-year ARM7.515%7.985%
5 more rows

When the Fed raises rates what happens to mortgage rates? ›

And as short-term interest rates go up, long-term interest rates typically also rise. As this happens, and as the interest rate on the 10-year Treasury bond moves up, mortgage rates also tend to rise.

Do mortgage rates change with Fed rate? ›

The Fed's moves impact the cost of a variety of financial products, including adjustable-rate mortgages, but also mortgage pricing more broadly. Generally, mortgage rates track down when the Fed lowers its key federal funds rate. Whether mortgage rates move up or down, though, it's tough to time the market.

What happens when the Fed cuts interest rates? ›

Lower borrowing rates for both consumers and businesses. This will incentivize consumers to spend and businesses to invest in projects thus injecting capital into the economy. This infusion of capital will typically spur growth in the economy and the markets.

How to get a 6% mortgage? ›

How to get a 6% mortgage rate now
  1. Buy mortgage points. ...
  2. Improve your credit score. ...
  3. Increase your down payment. ...
  4. Take out an adjustable-rate mortgage. ...
  5. Negotiate your mortgage rate. ...
  6. Get a shorter home loan term.
Apr 11, 2024

Top Articles
Latest Posts
Article information

Author: Rubie Ullrich

Last Updated:

Views: 5589

Rating: 4.1 / 5 (52 voted)

Reviews: 83% of readers found this page helpful

Author information

Name: Rubie Ullrich

Birthday: 1998-02-02

Address: 743 Stoltenberg Center, Genovevaville, NJ 59925-3119

Phone: +2202978377583

Job: Administration Engineer

Hobby: Surfing, Sailing, Listening to music, Web surfing, Kitesurfing, Geocaching, Backpacking

Introduction: My name is Rubie Ullrich, I am a enthusiastic, perfect, tender, vivacious, talented, famous, delightful person who loves writing and wants to share my knowledge and understanding with you.