Hennion & Walsh Asset Management President and CIO Kevin Mahn reacts to a Zillow economist warning a 7% mortgage rate could be the new normal on ‘The Big Money Show.’
Fannie Mae has lifted its forecast for mortgage rates from just a month ago, saying rates will stay higher for longer than they previously thought — and fewer homes will be sold than they expected in 2024.
The government-backed organization said in its February forecast that it expects the average rate for a 30-year fixed mortgage to drop below 6% by the end of the year to 5.9% in the fourth quarter.
Now, Fannie Mae expects rates to be a half-percent higher (6.4%) by the end of this year, and remain above 6% for another two years, gradually declining to a flat 6% by fourth-quarter 2025.
A "For Sale" outside a house in Hercules, California, on May 31, 2022. (David Paul Morris/Bloomberg via / Getty Images)
Freddie Mac's latest data shows the average rate for a 30-year fixed mortgage is currently around 6.74%. After peaking at 7.79% in late October, rates steadily declined until mid-January when they reversed course and began marching back up.
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Rates have fallen slightly for the past few weeks, but economists do not expect them to drop significantly any time soon. Sam Khater, Freddie Mac’s chief economist, said last week, "In this environment, there is a good possibility that rates will stay higher for a longer period of time."
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"The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024," Doug Duncan, Fannie Mae senior vice president and chief economist, said in a statement announcing the increase in mortgage rate expectations.
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"Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we'd previously forecast, as markets continue to evolve their expectations of future monetary policy," he explained.
A housing development in Trappe, Maryland, on Oct. 28, 2022. (Jim Watson/AFP via / Getty Images)
"Still," he added, "while we don’t expect a dramatic surge in the supply of homes for sale, we do anticipate an increase in the level of market transactions relative to 2023 — even if mortgage rates remain elevated."
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Fannie Mae said the change to its mortgage rate outlook was the principal driver of a downward revision to its total home sales forecast. The organization now expects 4.91 million home sales in 2024, down from 5 million, and 5.4 million sales in 2025, down from 5.54 million.
FAQs
Now, Fannie Mae expects rates to be a half-percent higher (6.4%) by the end of this year, and remain above 6% for another two years, gradually declining to a flat 6% by fourth-quarter 2025. Freddie Mac's latest data shows the average rate for a 30-year fixed mortgage is currently around 6.74%.
What are mortgage rates expected to be in 2025? ›
Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
What will the mortgage rate be in the next 5 years? ›
Most forecasting models predict that mortgage rates will remain above 6% in 2024, potentially dropping further in 2025. Whether or not the Federal Reserve loosens its monetary policy will play a significant role in determining the direction of interest rates.
Does Fannie Mae predict that higher mortgage rates will stick around longer? ›
Fannie Mae expects 'higher for longer' trend to continue
Fannie Mae's research group is expecting mortgage rates to stick around 7% for the rest of the year, which will "modestly" slow housing activity for the rest of 2024. However, it does see the possibility of some rate declines.
What is the Fannie Mae mortgage rate forecast for 2024? ›
Financial markets are now pricing in lower odds of aggressive fed funds rate cuts this year, leading to some upward drift in the mid-to-longer range of the interest rate curve, including mortgage rates. Thus, we forecast the 30-year mortgage rate to end 2024 at 6.4 percent, up from 5.9 percent in our previous forecast.
What will mortgage interest rates be in 2026? ›
The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.
Will mortgage rates ever be 3% again? ›
If inflation falls significantly and the economy enters a deep recession, it is possible that mortgage rates could fall back to 3%. However, this scenario is considered unlikely by most economists.
What will housing interest rates be in 2027? ›
Lord: “For the rest of 2023, I predict rates for the 30-year fixed-rate mortgage will average 7.3%, followed by 6.1% in 2024, 5.5% in 2025, 5% in 2026, 4.5% in 2027, and 4.5% in 2028.
What will the interest rate be in 2028? ›
The OBR raised its mortgage forecast from 4.1pc to 4.9pc in January 2028. For a homeowner with a typical £200,000 mortgage, this jump would represent an increase of £1,092 a year, or £91 a month, according to broker L&C.
What will interest rates be in 2030? ›
Former Treasury Secretary Lawrence Summers recently warned that interest rates on Treasury bills could remain well above 3 percent through 2030, after averaging only 1.5 percent in the last decade.
The general consensus among industry professionals is that mortgage rates will slowly decline in the last quarter of 2024. The projected declines have shrunk, though, in recent months. At the start of the year, for instance, Fannie Mae predicted rates would drop to 5.8%.
Do longer term mortgages have higher interest rates? ›
Because 15-year loans are less risky for banks than 30-year loans—and because it costs banks less to make shorter-term loans than longer-term loans—a 30-year mortgage typically comes with a higher interest rate.
Will the Fed lower rates in 2024? ›
As recently as their last meeting on March 20, the officials had projected three rate reductions in 2024, likely starting in June. But given the persistence of elevated inflation, financial markets now expect just one rate cut this year, in November, according to futures prices tracked by CME FedWatch.
What will the mortgage rate be in 2025? ›
Now, Fannie Mae expects rates to be a half-percent higher (6.4%) by the end of this year, and remain above 6% for another two years, gradually declining to a flat 6% by fourth-quarter 2025. Freddie Mac's latest data shows the average rate for a 30-year fixed mortgage is currently around 6.74%.
Where will mortgage rates be in 5 years? ›
MBA: Rates Will Decline to 6.4% In its April Mortgage Finance Forecast, the Mortgage Bankers Association predicts that mortgage rates will fall from 6.8% in the first quarter of 2024 to 6.4% by the fourth quarter. The industry group expects rates will fall below the 6% threshold in the fourth quarter of 2025.
When to lock in mortgage rate? ›
The ideal time to lock your mortgage rate is when interest rates are at their lowest, but this is hard to predict — even for the experts. It's worth noting that interest rates could decrease during your lock period. Should this happen, you'll most likely have to pay the rate you initially locked in.
Will mortgage rates go back down in 2024? ›
Will mortgage rates go down—and stay there? The general consensus among industry professionals is that mortgage rates will slowly decline in the last quarter of 2024. The projected declines have shrunk, though, in recent months. At the start of the year, for instance, Fannie Mae predicted rates would drop to 5.8%.
Why are mortgage rates so high? ›
When inflation is running high, the Fed raises those short-term rates to slow the economy and reduce pressure on prices. But higher interest rates make it more expensive for banks to borrow, so they raise their rates on consumer loans, including mortgages, to compensate.
