There’s renewed optimism in the Real Estate market after two years of high mortgage interest rates. The Federal Reserve’s action to fight rising inflation in 2022 by increasing rates meant homebuyers have paid more for their mortgages or have deferred buying a home until rates lowered.
With The Fed reducing rates slightly in September 2024 and more cuts possibly on the way, there’s speculation on what rates will be next year. In this blog, we will discuss what buyers should expect beyond 2024 with mortgage rates.
What Economic Factors Affect Rates?
It is the Federal Reserve’s job to implement monetary policy that affects the federal funds rate. In combating inflation, interest rates were increased to slow the economy and bring down inflation. As inflation dropped, the Fed made a rate cut in 2024 and signaled it may gradually decrease rates throughout 2025, says the Mortgage Investors Group.
According to Fannie Mae, mortgage interest rates are predicted to have a slight decrease by the end of 2024 but will continue to drop throughout 2025. Fannie Mae is forecasting average rates as low as 5.9% by the second quarter of 2025, rates under 6% that we haven’t seen since September 2022, explained Forbes.com.
Are Mortgage Rates Expected to Rise or Fall in 2025?
As mentioned, mortgage rates are expected to gradually decrease as The Fed loosens monetary policy, according to BusinessInsider.com. For the remainder of 2024, Realtor.com predicts mortgage interest rates will end 2025 at 6.43% and continue to drop, assuming the Fed stays on track with its plans.
Lower mortgage interest rates will have an impact on home-buying demand and home prices. Since rates can vary from state to state, be sure you research home loan lenders for the best rate that suits your timeframe.
Buy Now or Wait for Better Rates?
With lower mortgages on the horizon, should you buy now or wait for even better rates? Deciding whether to buy a home now will depend on several factors. Are you financially prepared to apply for a home loan (good credit, steady income, low debt)? Do you have enough money saved for the down payment? Would you be able to afford the mortgage payments at current interest rates? If the answer is yes to all, buying now is certainly favorable.
If you decide to wait for better rates, keep in mind you could face more competition and higher home prices. In an Associated Press story quoting the chief economist at Realtor.com, if mortgage rates drop, there is a possibility of an increase in demand thus driving up prices. This means more people viewing homes, more offers being made on homes and sellers having more influence over sale prices.
By buying a home now, you will face less competition and still have the option of refinancing it later if rates continue to drop at least 1% lower than your existing rate.
How Can Travis Credit Union Help?
If you are ready to buy this year or are making a move next year or later, TCU can help you get on the path to homeownership. We have the information you need to select the right mortgage for your unique financial situation. Choose from fixed-rate mortgages, adjustable-rate mortgages, VA and FHA loans and other loan products.
If you are already a homeowner, learn how you can use your home’s equity to fund home improvement projects, consolidate bills or pay for other major expenses. Contact us today or visit traviscu.org to learn more.