When Will Mortgage Rates Drop?

The Federal Reserve will likely cut rates this year, according to a vast majority of industry insiders. Experts suggested that the central bank was done with raising rates and that their next policy move would be a slashing of the Fed's funds rate.

The common consensus in the real estate industry is that we are not going to have any more rate hikes, Rates are on their way down; we just don't know exactly when this is going to happen

The Federal Reserve began raising rates in March 2022 to battle inflation that at one point soared to four-decade highs. The aggressive tightening of monetary policy elevated rates to their current 5.25 to 5.5 percent—the highest in more than 20 years— pushed up the costs of borrowing across the economy, including for home loans.

Mortgage rates, which hit their peak in October at about 8 percent, have been falling over the last weeks on the back of economic news that inflation has been cooling. The personal expenditure index (PCE) inflation metric, what the Fed focuses on when looking at how inflation is doing, jumped 2.6 percent in December on a year-over-year basis.

While this showed progress, it did not quite slow down enough to hit the Fed's 2 percent target, prompting the Fed to hold its funds rate at its current elevated level for the fourth time in a row.

Some housing economists have suggested that mortgage rates are stabilizing and are potentially going to fall down even further than the mid-6 percent range they are at currently as soon as the Fed slashes rates.

Many local agents expect the first cut could come in June and that policymakers will reduce rates three times this year and was confident that there will be a reduction in borrowing costs in 2024.

The bottom line is that the worst seems to be in the rearview mirror. I've even seen some of my clients take advantage of a refinance over the last month. This is rare, but I do expect to see more and more of this over the next 10 months. With the lower rates, comes more competition, multiple offers, and inflated prices. It's a double edged sword that I often help my client's navigate.

Any questions about buying, or refinancing, please let me know. Happy to provide any guidance I can!