Home mortgage rates expected to fall in 2024, but not until the second half of the year, says economist

home mortgage rates expected to fall in 2024
Photo credit Getty Images

PHILADELPHIA (KYW Newsradio) — It could cost less to borrow money in 2024 after years of interest rate hikes, but that doesn’t mean it’s going to be less expensive to buy a home. Economists believe the Federal Reserve won’t cut interest rates until summer.

The Fed has hiked interest rates 11 times since March of 2022, and the national average for a 30-year fixed rate mortgage hit 8% last year.

“Interest rates took the elevator going up the past couple of years, but they’re going to take the stairs coming down,” said Greg McBride, chief financial analyst with Bankrate.

The national average is now hovering around 7%, and McBride expects the Fed to cut rates no earlier than June.

“Most of that is going to come in the back half of the year, and that’s contingent on inflation,” he said. “From an interest rate perspective, later in the year will be better than earlier in the year. But the offset to that is if mortgage rates come down sharply, home prices are likely to go up in response.”

McBride says inflation needs to continue to come down in order for the Fed to feel comfortable to start to trim interest rates.

“If inflation is stubbornly high, that’s going to limit how much the Fed can cut interest rates this year. That’s why I only expect to be able to cut rates twice.”

McBride says more sellers may list their homes this year as rates come down, but buyers will still have a tough time.

“It’s not really going to do much to ease the affordability pressures because, with the limited inventory and high home prices, those are really going to persist. We might see some modest improvement on the inventory front but affordability is still going to be an issue.”

Buyers may feel pressure to overpay for a home or waive inspection, but McBride says if the competition is that heated, just walk away.

“Making the biggest financial decision of your life under duress is rarely a recipe for success.”

Mortgage rates aren’t all that is expected to drop. Savings rates are also due, he said.

“So if you’ve had your eye on a CD, now is the time to lock in. I wouldn’t expect those to improve as the year progresses.”

Featured Image Photo Credit: Getty Images