When Will Mortgage Rates Go Down?

Mortgage rates remain one of the biggest factors affecting affordability for Arizona homebuyers and homeowners considering refinancing. After several years of elevated interest rates, many buyers are asking the same question: when will mortgage rates finally go down?

The short answer is that rates may gradually improve as inflation cools and the Federal Reserve begins lowering short-term interest rates, but significant drops are unlikely to happen overnight.

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.

Why Mortgage Rates Increased

To understand where rates may be headed, it helps to understand how we got here.

During 2020 and 2021, mortgage rates fell to historic lows as the Federal Reserve lowered interest rates to support the economy during the pandemic. However, rising inflation, supply chain disruptions, energy costs, and strong consumer spending led the Fed to aggressively increase rates throughout 2022 and 2023.

As inflation climbed, mortgage rates followed. By 2024, average 30-year fixed mortgage rates hovered around the 7% range..

What Is the Current Mortgage Interest Rate?

This brings us to our current mortgage interest rates. In 2024, the average mortgage rate has hovered around the 7% mark.

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.

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.

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%.

On July 11, it was reported that the inflation rate for June 2024 declined 0.1% for the first time in 4 years to 3%, an indication that inflation is headed in the right direction.

Next Consumer Price Index (CPI) Release Date

The July 2024 data will be released on Aug. 14, 2024 at 8:30 AM ET.

Follow The Latest

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.

Follow The Latest

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.

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%.

The committee will look to the August 14 and September 11 Consumer Price Index releases to continue to track inflation numbers. Industry experts expect that if inflation continues to trend downward, there may be a federal funds rate decrease following the September 18 FOMC meeting.

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.

Should You Wait to Buy a Home?

Trying to perfectly time mortgage rates is extremely difficult. In many cases, waiting for lower rates can backfire if:

• Home prices continue rising
• Competition increases as rates improve
• Inventory remains limited
• Buyers re-enter the market simultaneously

A better strategy is often to focus on:

• Your monthly payment comfort level
• Long-term affordability
• Your financial goals
• Refinancing opportunities later if rates improve

Remember: you can refinance a mortgage later, but you cannot go back and buy a home at yesterday’s prices.

Factors That Affect Your Personal Mortgage Rate

Even when market rates are elevated, your individual mortgage rate depends on several personal financial factors, including:

• Credit score
• Down payment amount
• Loan type
• Debt-to-income ratio
• Loan term
• Occupancy type

Improving your financial profile can help you secure a better interest rate regardless of broader market conditions.

This article is for educational purposes only and does not constitute financial or mortgage advice. Loan programs, rates, and guidelines may change at any time. All loans are subject to credit approval and underwriting. For guidance tailored to your situation, consult a licensed mortgage professional.