Mortgage interest rates have been a factor affecting affordability for homebuyers and sellers looking to navigate the current housing market. Those hoping to buy a home in 2024 are keeping an eye on mortgage rate predictions and home prices, asking themselves – when will mortgage rates go down?
What Are Mortgage Rates Today?
To understand what mortgage rates are today, it’s important to know the economic factors that got us to this point.
How Inflation Resulted in Rising Rates
In early 2020, the U.S. labor market saw a historic increase in job losses. To counter rising unemployment, the Federal Reserve provided rate cuts that in turn brought mortgage rates to historic lows.
Supply chain problems, energy prices, and increased consumer demands lead to a sharp rise in inflation in 2021 and 2022. As a reaction to curb inflation, the Fed began to aggressively raise the federal funds rate, leading to a historic high in late July 2023. As of July 2024, the Fed has held this increased rate steady, leading to elevated mortgage interest rates.
What Is the Current Mortgage Interest Rate?
This brings us to our current mortgage interest rates. In 2024, the average mortgage rate hovered around the 7% mark until July of 2024. In July, we saw mortgage rates begin a steady decline and as of August 2024 mortgage rates have fallen into the low 6% range.
For up-to-date information on mortgage rates today, Mortgage News Daily provides daily updates to the 30-day fixed mortgage rates. This reference includes updates from Freddie Mac, Mortgage Bankers Association, and FHFA.
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Will Mortgage Rates Go Down in 2024?
The Fed has left the federal funds rate unchanged since late July of 2023 as a measure to battle inflation. After this year-long effort, many are hoping that mortgage rates will start to go down before the end of 2024. The expectation is that the Fed will make a federal funds rate cut at the September 18 FOMC meeting.
To predict mortgage rates dropping, it’s important to track the catalysts that could drive this change.
Catalysts for Mortgage Rate Drops
CPI Inflation Rate
The Consumer Price Index (CPI) is a critical measure of inflation that the Federal Reserve monitors. The U.S. Bureau of Labor and Statistics releases an updated metric monthly.
The first step to tracking if mortgage rates will go down, is checking to see if the Consumer Price Index (CPI) has decreased. The Fed’s long-term goal is to see inflation back down to 2%.
Inflation reports released in July, August and September of 2024 reported a decline for the first time in 4 years. The July consumer price index, released in August, came in at 2.9%. The August 2024 CPI, released in September, has continued this trend with inflation cooling to 2.5%, the lowest since 2021.
With inflation numbers cooling, all eyes are on the September 18 FOMC meeting with the Fed is expected to announce a federal funds rate cut.
Next Consumer Price Index (CPI) Release Date
The September 2024 data will be released on October 10, 2024 at 8:30 AM ET.
FOMC Meetings and Federal Funds Rate
The next catalyst that can impact mortgage rates dropping is the federal funds rate. The Federal Open Market Committee (FOMC) meets eight times throughout the year to set the federal funds rate. They hold a press conference and send out a news release following these meetings.
The FOMC is a 12-member committee and part of the Federal Reserve System (the Fed). During the meetings, the FOMC reviews economic data, discusses economic and financial developments, and decides whether to change or maintain the target range for the federal funds rate.
If the Fed feels confident in decreases to the CPI, this may cause them to drop the federal funds rate. This decrease in the federal funds rate is what can impact a decrease in mortgage interest rates.
Next FOMC Meeting Date
Expect news from the September FOMC meeting on September 18.
Tracking the outcomes of both the monthly Consumer Price Index (CPI) release and the FOMC meetings is how you can predict what will happen to mortgage interest rates.
When Is the Next Fed Meeting?
To best track updates to the CPI and federal funds rate, below are important upcoming dates to monitor. These include both the next Fed meetings along with the latest CPI releases.
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Upcoming Dates To Watch
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Sept. 18, 2024
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FOMC Meeting
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Oct. 10, 2024
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Consumer Price Index Release
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Nov. 7, 2024
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FOMC Meeting
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Nov. 13, 2024
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Consumer Price Index Release
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Dec. 11, 2024
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Consumer Price Index Release
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Dec. 18, 2024
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FOMC Meeting
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Latest News Update
The FOMC held their latest meeting on July 30-31, followed by a press conference with board chair Jerome H. Powell. The Fed announced that they will continue to hold the federal funds rate at its current level of 5.25% - 5.50%. While the latest inflation numbers showed a decrease, it has not yet caused the FOMC to change the federal funds rate. Their overall inflation goal continues to be 2%.
Following the latest CPI release on September 11, the cooling of inflation to 2.5% should give the Fed guidance it needs to announce a federal funds rate cut at their next meeting on September 18.
For more details, view the press conference and latest FOMC meeting statement.
What Is Mortgage Interest Rate?
A mortgage interest rate is the percentage of interest that a mortgage lender charges on your loan. This rate is an important factor in determining how much you will pay over the life of your mortgage.
What Factors Affect Mortgage Interest Rate?
Market conditions such as the federal funds rate, set by the Federal Reserve, and economic indicators like the CPI, influence these rates. When the Federal Reserve adjusts the federal funds rate, it often leads to corresponding changes in mortgage interest rates.
There are other factors that affect the mortgage rate you may qualify for, including:
- Credit score
- Down payment
- Loan term
- Debt-to-income ratio