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? ›
Prediction of Mortgage Rates for 2025
Keep in mind that inflation is still a factor, and mortgage rates may continue to hover around 6%. Here are some predictions for 2025 from key players and industry associations in the mortgage space: Fannie Mae: 6.1% Mortgage Bankers Association: 5.9%
What will the mortgage rate be in 2026? ›
Bank of America Global Research economists expect multiple rate cuts over the next 24 months: four in 2025 and two in 2026, all in increments of 25 basis points, putting the 2026 final rates at 3.50% to 3.75%.
What is the mortgage rate forecast for the next 5 years? ›
Trading Economics offers a more optimistic outlook, predicting a rise to 5% in 2023 before falling to 4.25% in 2024 and 3.25% in 2025. This forecast is supported by Morningstar's analysis, which projects rates between 3.75% and 4%.
What is Fannie Mae mortgage rate prediction? ›
Fannie Mae, MBA, Wells Fargo
| 2024 Forecast | 2025 Forecast |
|---|
| Fannie Mae | 7% | 6.7% |
| Mortgage Bankers Association | 6.5%* | 5.9%* |
| National Association of Home Builders | 6.68% | 6.01% |
| National Association of Realtors | 6.8% | 6.2% |
3 more rowsAs a result, we expect mortgage rates to remain elevated through most of 2024. These high interest rates will prompt prospective buyers to readjust their housing expectations, but we anticipate housing demand to remain high due to favorable demographics, particularly in the starter home segment.
How high will interest rates 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.
Will we ever see 4 mortgage rates again? ›
Will we ever see the 4% mortgage again? The 4% mortgage is unlikely to return any time soon, real estate economists say. Realtor.com expects rates to ease by year's end – to 6.5%. “People are just going to have to get used to, if not 7% rates, then 6% rates,” said Daryl Fairweather, chief economist of Redfin.
What will mortgage rates be in 2024? ›
Average 30-year mortgage rates continue to hover in the 6.5% to 7% range, according to Zillow data. Rates may start going down later this year, but it depends on how inflation trends in the coming months.
Will HELOC rates go down in 2024? ›
HELOCs benefit most from rate decreases. With the Fed looking to lower rates later in 2024, a HELOC may be more beneficial than a home equity loan because the rate could go down. Also, with a HELOC, you can draw funds as you need them, and you only have to pay interest on the funds you actually take out.
Once you find a rate that is an ideal fit for your budget, lock in the rate as soon as possible. There is no way to predict with certainty whether a rate will go up or down in the weeks or even months it sometimes takes to close your loan.
Will US housing ever be affordable again? ›
Experts overwhelmingly say that the housing market isn't going to crash anytime soon. The last housing crash helped cause today's lack of supply, which is what's keeping prices from falling. Mortgage rates, however, are expected to fall this year. This will help make homeownership more affordable.
Will 2024 be a good time to buy a house? ›
Many prospective homebuyers chose to wait things out in 2023, in the hopes that 2024 would bring a more advantageous market. But so far, with mortgage interest rates still relatively high and housing inventory stubbornly low, it looks like 2024 will remain a challenging time to buy a house.
What will mortgage rates 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 is the mortgage rate forecast for 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.
What is the Fannie Mae forecast for 2024? ›
In particular, we now expect market purchase volumes to be $1.4 trillion in 2024, representing 14 percent growth from 2023 but a downward revision of $35 billion from last month's forecast. In 2025, we expect purchase volumes to grow a further 13 percent.
Will mortgage rates ever be 3 again? ›
Economists and housing market experts agree that mortgage rates will fall over the next several years, but not below 3%.
What will CD rates be in 2025? ›
The Top CDs for Locking Your Rate Until 2025 to 2027
| Best 1-Year CDs - Mature Early 2025 | APY | Minimum |
|---|
| XCEL Federal Credit Union | 5.45% | $ 500 |
| Fortera Credit Union | 5.35% | $ 1,000 |
| MTC Federal Credit Union | 5.25% | $ 5,000 |
| Technology Credit Union | 5.25% | $ 1,000 |
20 more rowsFeb 28, 2024
While the Fed maintained its target rate in the 5.25 percent to 5.50 percent range at its June 2024 meeting, the central bank hasn't yet declared victory in its fight against inflation. However, it seems the Fed is done raising its target rate in this cycle and forecasts one rate reduction later in 2024.
