If you’re an investor or aspiring homebuyer, you know that mortgage rates have been quite unfavorable over the past few years. Luckily, after peaking at nearly 8% in October 2023, we’ve started to see rates slowly cool down. However, that doesn’t necessarily mean they’ll continue to drop. In the video below, we’ll go over the current state and whether or not mortgage rates in 2024 will improve.
Are Mortgage Rates Improving in 2024?
Key Moments in the Video
Where Are Mortgage Rates At Right Now?
Over the past year or so, mortgage rates have risen to their highest levels in decades, making it challenging for investors and homebuyers to secure homes at favorable prices. However, after the peak in late 2023, rates have cooled just a bit. As of now, in early February, the average mortgage rate on a 30-year fixed mortgage is 7.21%.
Whether you’re looking at investing or you’re a rental property management company in Washington, DC, it’s important to pay close attention to mortgage rates as they change throughout the year. This can give you an indication of when to buy real estate or, if you’re a property manager when you can expect to manage more properties.
Predictions for Mortgage Rates in 2024
It’s hard to say what mortgage rates in 2024 will look like going forward. However, most real estate experts remain hopeful for lower rates throughout the year. Here’s what a few of them have to say.
- National Association of Realtors (NAR)- Chief Economist Lawrence Yun at NAR predicts that mortgage rates are “heading toward 7% in a few months, and into the 6% range by the spring of 2024.”
- Fannie Mae Housing Forecast- The Fannie Mae Housing Forecast predicts that the average 30-year fixed rate will hang around 7% for the first quarter of 2024 and fall to 6.5% by the end of the year.
- Mortgage Bankers Association (MBA)- In MBA’s Mortgage Finance Forecast, they predict that mortgage rates will decrease from 7% in the first quarter of 2024 to 6.1% by the fourth quarter.
- Realtor.com- In a 2024 Housing Market Forecast, experts at Realtor.com expect rates to average 6.8% this year, dipping to 6.5% by the end of the year.
- Wells Fargo- In the latest US Economic Forecast, the Economics Group at Wells Fargo predicts that the 30-year conventional mortgage rate will drop to 6.85% in the first quarter of 2024 and decline to 6% by the end of the year.
What Factors Affect Mortgage Rates?
Several things can affect mortgage rates in 2024, aside from personal factors. Of course, your rate may depend on your financial health. However, there are a few major factors at play, most of them reflecting the basic rules of supply and demand. Here’s what to keep in mind while looking at mortgage rates.
- Rate of Economic Growth
- Federal Reserve Monetary Policy
- The Bond Market
- Housing Market Conditions
Inflation is when prices for things go up over time, making each dollar buy less. For mortgage lenders, this means they have to charge interest rates to cover the loan and make up for potential loss in purchasing power due to inflation. If mortgage rates are, for example, 6% and inflation is 2%, lenders are essentially making a real profit of 4%. So, lenders watch inflation closely and might adjust rates to ensure they earn enough to keep up with rising prices.
Rate of Economic Growth
When the economy is doing well, with more jobs and higher wages, people tend to buy more homes. This increased demand for home loans increases mortgage rates because there’s a lot of competition for available money from lenders. However, when the economy isn’t doing so well, the reduced demand for home loans makes mortgage rates go down because lenders don’t have as many people asking to borrow money.
Federal Reserve Monetary Policy
The Federal Reserve acts as the financial guardian of the United States, aiming to maintain economic stability by ensuring sufficient jobs and stable prices. Through their monetary policy, the Fed sets interest rates and controls the money supply. While it doesn’t directly determine mortgage interest rates, its decisions impact the overall interest rate environment. So, increasing the money supply generally makes borrowing, including mortgages, cheaper. Conversely, tightening the money supply can result in more expensive borrowing and higher mortgage rates.
The Bond Market
Mortgage rates are linked to the bond market, specifically mortgage bonds or mortgage-backed securities (MBS). Banked and investment firms sell MBS, which are bundles of mortgages sold in the bond market. When demand for these bonds is high, mortgage rates go down, and when demand is low, rates go up. A common benchmark for mortgage rates is the yield on the 10-year Treasury bond.
Housing Market Conditions
The supply and demand dynamics in the housing market can impact mortgage rates. In a strong housing market with high demand for homes, lenders may be more inclined to raise interest rates. On the other hand, in a lower-demand housing market, lenders might offer more competitive rates to attract borrowers.
Is 2024 a Good Time to Refinance?
It’s hard to say for sure if 2024 is a good time to refinance your current mortgage. That said, it depends on several factors, including current and potential interest rates.
Back in 2020 and 2021, when interest rates were at record lows, many people took advantage of securing a mortgage. Additionally, many people took that opportunity to refinance their mortgages. As such, if you were lucky enough to secure a mortgage at those rates, now might not be the best time to refinance.
How to Get a Lower Mortgage Refinance Rate
Refinancing your mortgage can be highly beneficial as long as you get a better rate than you had before. Luckily, a few methods can be beneficial, especially if you bought a property between mid-October and early November when rates were at their highest.
Since you must consider closing costs and fees associated with refinancing, most mortgage experts suggest refinancing only makes sense if you can get a rate that’s at least 1% lower than your current rate. That said, if you’re looking to secure a lower mortgage refinance rate, here are a few helpful tips.
- Get quotes from more than one lender
- Improve your credit score
- Save for a larger down payment
- Choose a shorter loan term
- Negotiate to potentially waive or reduce closing costs
Find Management for Your Next Investment
If you plan on taking advantage of lower mortgage rates in 2024 and buying an investment property, you’ll want to start planning now. After all, investing in real estate usually involves much more work than simply buying a property. Depending on your goals and plans for the property, you’ll want to account for potential renovations, marketing costs, and property management.
If you’re looking for a full-service company to help you find qualified tenants for your rental properties, look no further than BMG. Bay Property Management Group offers comprehensive rental management services, so whatever you need help with, we’ve got it covered. Contact us today to learn more about our services in Baltimore, Philadelphia, Northern Virginia, and Washington, DC.