Last Updated on September 24, 2024
Last week, the Federal Reserve delivered good news, as they issued their first interest rate cut in four years, helping to make mortgages more affordable for Americans.
The half-point rate slash is twice as much as predicted, signaling the Fed believes inflation is now under control, allowing the focus to shift to preventing a recession and limiting job losses.
While mortgage rates aren’t directly tied to the federal rates fund, they do follow long-term trends in the bond market. Mortgage rates have already dropped around a percentage point since May and almost 2% from all-time highs. It is likely that mortgage rates could keep moving further down if the Fed continues to cut short-term rates even more.
Danielle Hale, chief economist for Realtor.com said, “These lower rates have not yet induced a big shift in homebuyer and seller activity as home sales still remain sluggish, but they have provided long-awaited relief to homebuyer purchasing power.”
What’s more, monthly mortgage rates for a median-priced home have dropped nearly $300 a month, and homeowners can expect to spend around $2,100 per month now.
As we prepare to enter into the fourth quarter of 2024, top mortgage experts have predicted what consumers can expect in 2025 in terms of mortgage interest rates.
By Q4 2025, the Mortgage Bankers Association projects rates to be at 5.8% and right now, the bond market is forecasting even lower rates. It is our belief that with a decline in rates, both buyers and sellers will be more willing to enter the market. As rates drop, expect more buyer demand and a likely increase in appreciation. One strategy that buyers are currently employing is to buy the home sooner, thus locking in lower home prices while planning to refinance to even lower rates when the time is right.
While certainly not set in stone, these predictions are welcomed news, especially in light of the multi-decade high mortgage interest rate of 7.79% that home buyers were facing this time last year.
