Mortgage rates hold steady but likely to keep dropping as 2024 unfolds: Freddie Mac

Mortgage rates held steady to kick off the New Year, but buyers can expect further drops deeper into 2024, according to Freddie Mac. 

The average 30-year fixed-rate mortgage was 6.62% for the week ending Jan. 4, according to Freddie Mac's latest Primary Mortgage Market Survey. That's a slight increase from the previous week when it averaged 6.61%. A year ago, the 30-year fixed-rate mortgage averaged 6.48%. 

The average rate for a 15-year mortgage was 5.89%, down from 5.93% last week and up from 5.73% last year. 

"Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point. However, since then, rates have moved sideways as the market digests incoming economic data," Freddie Mac's Chief Economist Sam Khater said. "Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds. 

"While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise," Khater continued. 

Homebuyers can find the best mortgage rate by shopping around and comparing options. You can visit an online marketplace like Credible to compare rates, choose your loan term, and get preapproved with multiple lenders at once.

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Fed expected to slash interest rates

The Federal Reserve could begin dialing back interest rates as early as the first quarter of 2024. During its December meeting, the central bank announced a third interest rate pause, leaving the federal funds rate at a 22-year high of 5.25% to 5.5%. However, Fed officials hinted that they could begin rate cuts this year, with interest rates expected to drop to 4.6%, according to updated economic forecasts in the central bank's Summary of Economic Projections (SEP).

"We are anticipating a declining interest rate environment throughout 2024, with rates traders pricing in a 0.25% cut to the target rate by the end of Q1 and a further 0.25% to 0.5% cuts in Q2, which should help ease some of the rate volatility we experienced last year," Imperial Fund Managing Director Victor Kuznetsov said. "That said, originations will continue to be a challenge as mortgage rates will likely settle between 5% and 6%, which isn't materially less than where they are today and does not significantly alter the current housing fundamentals picture. 

"Home prices do not appear ready to come down meaningfully and we expect starts and apps to remain fairly steady through the year," Kuznetsov continued.

If you are looking to take advantage of the current mortgage rates by refinancing your mortgage loan or are ready to shop for the best rate on a new mortgage, consider visiting an online marketplace like Credible to compare rates and get preapproved with multiple lenders at once.

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Homebuyers want rates to dip lower

Twelve percent of prospective buyers said mortgage rates would need to dip below 6% to make buying a home affordable, according to a recent Realtor.com survey. Moreover, 28% of homebuyers are waiting for rates to drop below 4% before they wade back into the housing market. 

"The typical outstanding mortgage has a rate of less than 4%, more than 2.5 percentage points below today's rate," Realtor.com Senior Economic Research Analyst Hannah Jones said in a statement. "This gap is likely to keep many sellers on the sidelines, waiting for mortgage rates to come down further."

Pending home sales in November leveled off, matching October's record-low level, and were 5.2% lower than in November of last year, despite the dip in mortgage rates, according to the National Association of Realtors (NAR).

If you're looking to become a homeowner, you could still find the best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.

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