Mortgage Rates Predictions December 2024: Will Rates Fall?

As we approach December 2024, mortgage rates predictions suggest that rates are unlikely to see significant declines this month, standing at around 7.03% for a 30-year fixed mortgage. While buyers have been eagerly hoping for lower borrowing costs, current economic trends indicate that mortgage rates may hold steady or even rise slightly. This article aims to delve into expert opinions, market trends, and underlying factors influencing mortgage rates, providing a comprehensive overview for potential homebuyers looking to navigate this complex market.

Mortgage Rates Predictions December 2024: Will Rates Fall?

Key Takeaways:

• Current mortgage rates are averaging 7.03% for 30-year fixed loans and 6.26% for 15-year fixed loans.
• Experts indicate that significant decreases in rates for December 2024 are unlikely.
• The Federal Reserve's actions do not directly decrease mortgage rates.
• Rising 10-year Treasury yields could press mortgage rates upward.
• A decline in home affordability is prompting many buyers to reconsider their purchasing timelines.

Current State of Mortgage Rates

According to recent data, the average mortgage rate for a 30-year fixed loan is approximately 7.03%, as reported by sources such as LendingTree. This rate reflects a slight increase from earlier lows experienced in November, which made some hopeful that a downward trend might resume. However, experts reveal that current rates remain significantly impacted by broader economic conditions, and immediate relief is not anticipated.

Peiling Lee's article in Getty Images reflects the anxiety of many homebuyers, illustrating how the mortgage rate surge post-pandemic has turned the market challenging for would-be homeowners. Rates plummeting below 3% during the great recession now feel like a distant memory as the pressure of inflation looms larger.

Why Mortgage Rates Are Stagnant or Rising

The anticipation for lower mortgage rates has been met with the reality of economic conditions that seem to be countering those hopes. Here are some vital points to consider:

1. Federal Reserve Policies: The Federal Reserve has been intentionally adjusting benchmark rates to manage inflation. Despite rate cuts of 50 basis points in September and 25 basis points in November, this has not translated into a corresponding drop in mortgage rates. As noted by Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage, “The Fed's decisions do not automatically mean cheaper mortgages,” emphasizing the complex relationship between Fed rates and mortgage costs.
2. Treasury Yields: Mortgage rates often closely follow the trends of 10-year Treasury yields. Currently, rising yields—prompted by inflationary concerns associated with the next administration's fiscal policies—have pressured mortgage rates in the opposite direction. According to data from The Mortgage Reports, worsening inflation outlooks have resulted in a rising trajectory for treasury yields which directly affects mortgage pricing: “It seems unlikely that mortgage rates will fall in December,” Alvarez states.
3. Economic Indicators: Looking forward, several economic indicators will significantly influence future mortgage rates. Key factors such as inflation numbers and changes in the job market are critical. If inflation shows signs of improvement in the coming months, we might see the Fed take a more accommodating stance, yet our current trajectory indicates little respite for buyers in December.
4. Stubborn Housing Prices: With home prices rising, potential homeowners face a double bind; not only are mortgage rates high, but home prices have also seen an increase. Reports from the National Association of Realtors indicated that national home prices rose 4.0% year-over-year as of October 2024. Fannie Mae projects home prices will go up 6.1% by the end of this year, intensifying the affordability crisis.

Market Trends and Buyer Sentiment

The current environment is particularly challenging for prospective homebuyers. Many individuals are grappling with the consequences of sustained high mortgage rates combined with climbing home prices. The pressure to purchase a home is compounded by affordability issues, leading many to reflect on their timing. Here’s what current market sentiments indicate:

• Homebuyer Hesitation: Many would-be buyers are delaying purchases, hoping for rates to dip. However, as experts advise, waiting for lower rates might not be prudent due to the risk that home prices could outpace the savings from any rate reductions. This situation creates a dilemma in the market as buyers find themselves stuck between rising prices and high borrowing costs.
• Refinancing Challenges: Many homeowners previously secured lower rates are now hesitating to refinance due to prevailing high rates, resulting in lower transaction volumes. The market has seen a substantial drop in refinancing applications, as those with existing lower rates are often unwilling to switch to higher rates.
• Future Perspectives: While December appears challenging, experts have not entirely given up hope for significant changes in the new year. Should inflation show unexpected improvements and job growth slow, the Federal Reserve might respond with further rate cuts, potentially easing pressures on mortgage rates into mid-2025.

The Bigger Picture

Ultimately, as we look to December 2024, the outlook for mortgage rates remains cautious. While many are hopeful for a decline in rates that could enable newfound flexibility in home buying, current trends indicate that homebuyers must be prepared for continued high costs. For those in stable financial positions, purchasing sooner rather than later might mitigate the risk of exacerbating costs amid rising home prices.

1. Housing Affordability: Future projections from organizations like the Mortgage Bankers Association indicate that as long as rates stay above 6%, housing sales will remain strained. The problem of affordability will become a more pressing issue as income levels lag behind.
2. Overall Economic Growth: The broader economic landscape will heavily influence mortgage trends. As economic growth slows, potential Fedrate adjustments could create opportunities for rates to decrease later down the line.
3. Strategic Timing for Buyers: Savvy buyers should consider not just rates but the total cost of ownership, including potential home price appreciation and owning vs renting costs. With increased pressure from inflation and demand in the housing market, now may be the best time to explore options aggressively.