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%.
How high could mortgage rates go by 2025? ›
The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%.
What is the rate forecast for 2025? ›
The median estimate for the fed-funds rate target range at the end of 2025 moved to 3.75% to 4%, from 3.5% to 3.75% in December.
What is Fannie Mae mortgage rate prediction for 2024? ›
Some economists are revising their rate predictions, looking for them to be higher this year than previously thought. Fannie Mae was among them, this week saying it expected the 30-year fixed-rate mortgage to end 2024 at 6.4%, up from its 5.9% prediction earlier this year.
What are interest rates expected to be in 2026? ›
The nation's top economists say the Fed is most likely to keep interest rates higher than 2.5 percent — often considered the “goldilocks,” not-too-tight, not-too-loose level for its benchmark federal funds rate — until the end of 2026, Bankrate's quarterly economists' poll found.
What will the mortgage rate be in the next 5 years? ›
Mortgage rates are currently expected to continue trending down through 2024 and into 2025. The Mortgage Bankers Association thinks that 30-year mortgage rates could fall to 5.9% in 2025.
What will the mortgage rates be in 2024 and 2025? ›
30-Year Fixed Mortgage Rate Forecasts
| 2024 Forecast | 2025 Forecast |
|---|
| Fannie Mae | 6.6% | 6.2% |
| Mortgage Bankers Association | 6.1%* | 5.6% |
| National Association of Home Builders | 6.61% | 6.01% |
| National Association of Realtors | 6.5% | 6.1% |
3 more rowsHere'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."
Where will mortgage rates be in 10 years? ›
According to their latest forecast for 30-year mortgage rates in October 2023, they expect them to range from 7.40% to 7.86%, with an average of 7.63%. They also predict that mortgage rates will peak at 9.41% in May 2024, before gradually declining to 3.67% by November 2027.
Will rates drop again 2025? ›
Expert Opinions. Some experts believe rates will start falling in 2024-2025, but not as much as markets anticipate. Others warn that the Fed might keep raising rates into 2025, surprising markets and hurting the economy.
After all, higher rates equate to higher minimum payments. So, you may be wondering if, and when, mortgage rates might fall to 3% or lower again - and whether or not it's worth waiting to buy a home until they do. Although rates could fall to 3% again one day, it's not likely to happen any time soon.
Is 2024 a good year to buy a house? ›
Experts like Fannie Mae and the Mortgage Bankers Association predict that mortgage rates will decrease in 2024 and continue to drop in 2025 but this likely won't be until the latter half of the year.
What is the 30-year fixed mortgage rate in 2024? ›
The average 30-year fixed-refinance rate is 7.34 percent, up 3 basis points over the last week.
Where will home interest rates be in 2025? ›
The latest forecast from the National Association of Home Builders puts interest rates at 6.89% to finish 2023 in its October predictions. The organization says that the 30-year fixed rate will be 6.79% in 2024 and 5.72% in 2025.
Will mortgage rates ever be 4% again? ›
If those projections remain and the Fed begins to lower its key rate, mortgage rates will presumably follow suit. Sunbury predicts the Fed will cut rates by between 100 to 125 basis points starting in May or June of 2024. “This would bring the policy rate to 4% to 4.25%,” Sunbury explains.
How high will interest rates be in 2027? ›
Futures indicate that short-term interest rates will bottom out at about 3.75% in 2027, while the median forecast among members of the policy-making Federal Open Market Committee is 2.6% — more than 100 basis points lower.
Will mortgage rates go down in 2027? ›
According to their latest forecast for 30-year mortgage rates in October 2023, they expect them to range from 7.40% to 7.86%, with an average of 7.63%. They also predict that mortgage rates will peak at 9.41% in May 2024, before gradually declining to 3.67% by November 2027.
What will the interest rate be in 2030? ›
Last year, the White House projection for bill rates in 2030 was 2.4%. Such a level would be much higher than has been typical since the turn of the century. Three-month bill rates averaged around 1.5% over that period.
What will the 30-year mortgage rate be in 2024? ›
Mortgage giant Fannie Mae likewise raised its outlook, now expecting 30-year mortgage rates to be at 6.4 percent by the end of 2024, compared to an earlier forecast of 5.8 percent.
