Mortgage rates fall to 6.95%

Mortgage rates might still be considered high for many would-be buyers due to several factors.

Firstly, the current rates, although decreasing, are still higher than they were a year ago. The average rate on a 30-year fixed mortgage is currently at 6.95%, compared to 6.69% a year ago. Similarly, the average rate on a 15-year fixed mortgage is at 6.17%, compared to 6.10% a year ago.

Secondly, the higher mortgage rates are coming at a time when home prices are elevated due to a lack of inventory. The combination of higher mortgage costs and high home prices makes it more difficult for many potential buyers to afford a home.

Lastly, the current mortgage rates are significantly higher than the historically low rates seen just a few years ago. For example, in December 2021, it was still possible to get a 30-year loan at around the 3% mark. This dramatic increase in rates over a short period can make the current rates seem particularly high.

In summary, despite the recent decreases, mortgage rates are still considered high due to their comparison to rates a year ago, the elevated home prices, and the historical context of rates seen just a few years ago.

Based on the information provided, mortgage rates are expected to ease, but a sharp drop is not anticipated until the Federal Reserve starts reducing interest rates. Many experts and industry authorities believe that mortgage rates will follow a downward trajectory into 2024. However, the exact timeline for this decline remains uncertain.

According to Bankrate’s newest rate forecast, improving inflation data and evidence of slowing economic growth should bring mortgage rates below the 7 percent mark. However, whether they stay below 7 percent is contingent on further easing in inflation pressures.

Fannie Mae revised its anticipated average 30-year fixed mortgage rate trajectory1. In its April housing forecast, Fannie Mae projected rates to average 6.6% in Q3 but has since revised this to 7.1%. Moreover, the May forecast predicts that mortgage rates will average 7% in 2024, up from 6.6%.

Freddie Mac maintains that mortgage rates will stay above 6.5% through the first half of 2024, per its March Economic, Housing, and Mortgage Market Outlook forecast. In its May forecast, the mortgage giant anticipates the central bank will cut the federal funds rate only once this year, keeping mortgage rates elevated for the remainder of 2024.

Morgan Stanley strategists expect the average 30-year fixed mortgage rate to stabilize around 6.25% by the middle of 2025, down from nearly 7.8% in fall 2023. Despite a slight drop in rates, home prices have leapt 54% since 2019 and are expected to continue rising through 2025.

Overall, mortgage rates are influenced by a complex set of factors, including broader economic conditions, the monetary actions of the Federal Reserve, inflation, and the bond market. Long-term mortgage rates are directly impacted by the bond market, and the rate you’re offered on a mortgage will also depend on the lender you work with, its business costs, and your financial profile.