Last updated on September 25, 2024
Last week, the Federal Reserve delivered some good news by issuing its first interest rate cut in four years, helping to make mortgages more affordable for Americans.
The half-point rate cut is twice as large as expected, indicating the Fed believes inflation is now under control, allowing it to focus on preventing a recession and limiting job losses.
While mortgage rates are not directly tied to the federal funds rate, they do follow long-term trends in the bond market. Mortgage rates have already fallen about a percentage point since May and nearly 2% from record highs.. Mortgage rates are likely to It could continue to fall if the Fed continues to cut short-term rates further.
Danielle Hale, chief economist at Realtor.com, said: “These lower rates have not yet induced a major shift in homebuyer and seller activity as home sales remain sluggish, but they have provided some long-awaited relief to homebuyers’ purchasing power.”
What’s more, monthly mortgage rates for a median-priced home have dropped by nearly $300 a month, and homeowners can now expect to spend around $2,100 a month.
As we prepare to enter the fourth quarter of 2024, leading mortgage experts have predicted what consumers can expect in 2025 in terms of mortgage interest rates.
By the fourth quarter of 2025, the Mortgage Bankers Association projects rates will be 5.8%, and the bond market is currently pricing in even lower rates. We believe that with rates declining, both buyers and sellers will be more willing to enter the market. As rates decline, increased buyer demand and a likely increase in appreciation are expected. One strategy that buyers are currently employing is to purchase the home early, thereby locking in lower home prices while planning to refinance at even lower rates when the time is right.
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