When will mortgage rates go down?

Mortgage rates are currently high but they could soon drop this week. Getty Images/iStockphoto

It may seem like ancient history, but there was a time in recent times when mortgage interest rates were near record lows. During the peak of the pandemic in 2020 and 2021, interest rates dropped, providing home buyers a historic opportunity to secure low rates on their mortgages. Existing homeowners were also able to take advantage by securing refinance rates around 3% or lower. However, things have changed significantly since that point.

In an effort to cool high inflation, the Federal Reserve has raised the benchmark interest rate several times, and it now ranges between 5.25% to 5.50%. This is the highest in 22 years. As a result, mortgage rates have risen to the highest levels since 2000. And, it’s possible that rates could soon go higher. The Federal Reserve is meeting this week and is expected to announce a rate hike on Wednesday. While many expect rate increases to be put on hold this round, they could rise before 2023 is out.

“We are paying attention to signs that the economy is not calming down as expected,” Federal Reserve Chairman Jerome Powell said last month. “We remain prepared to raise rates further if appropriate and intend to keep policy at a restrictive level until we are confident that inflation is moving steadily downward toward our objective.”

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 may qualify for.

When will mortgage rates go down?

Before mortgage interest rates can fall, they must stop rising. Fortunately, many experts are predicting the same for this month’s Fed meeting. If they do, it would be the second pause in increases in recent months (the Fed also did not raise the benchmark rate in June). This will have the effect of keeping mortgage rates relatively stable. However, predicting when they will go down is more difficult.

“As the Fed continues to fight inflation and move closer to its 2% target, mortgage rates should respond positively to stabilization and begin to gradually decline in early 2024. My prediction is that We see rates around 6.5% and 5% in the first quarter of 2024. In Q4,” Brian Shahwan, vice president and mortgage banker at William Revis Mortgage, recently told CBS News.

“Looking in the crystal ball, I think mortgage rates will decline over the next six to 12 months, with some volatility accompanying this decline,” Mike Hardy, managing partner of Churchill Mortgage, told CBS News last month. “I think 30-year rates will be around 5.25% from now and 15-year rates will be around 4.875% per year.”

Mortgage rates are dependent on the actions (or lack thereof) of the Federal Reserve, which are dependent on progress toward reducing inflation. Until the fight against inflation becomes more controlled, the Fed is unlikely to ease rates, and borrowing costs are likely to remain high.

Not sure what mortgage rate you will qualify for? Learn here now.

Should you take a mortgage now?

With today’s mortgage rates hovering around 7%, many people have chosen to sit on the sidelines. Compared to the much lower rates that could be secured just a few years ago, some people feel that now is not the time to get a mortgage. However, for others it may be. Here are two reasons why it might still be worth acting:

Rates can go even higher: Certainly, today’s rates are not a bargain for most buyers. But if rates rise further this year or in 2024, today’s “high” 7% rate may be a “low” option tomorrow. Time your mortgage application accordingly.
You may lose your dream home: Many experts suggest a “fix the date, get married at home” approach. In other words, don’t be disappointed by today’s rates if your dream home suddenly goes on the market. Buy it anyway and “set rate date” for now. Mortgage rates will eventually drop to a point at which you can refinance at a lower rate than was prevailing. But, if you wait, you may lose the opportunity to get your dream home.

Bottom-line

Mortgage rates may be high now but they may not stay there for long. With rate hikes expected to be put on hold this week, the worst of the pain for mortgage rates may be over. And while they are unlikely to reach the 2020-2021 range anytime soon, that doesn’t mean buyers should automatically discount the action now. There are many compelling reasons to do so. Start exploring your mortgage rate options today to learn more.