Exciting News for Your Real Estate Goals: The Scoop on Mortgage Rates Continued Potential Decline

Good News for Your Real Estate Goals: The Scoop on How Mortgage Rates Might Continue to Decline

If you haven’t heard yet, mortgage rates have started to drop! This is good news if you’ve been on the fence with your real estate goals! And, there are a few reasons why this is – a combination of inflation and some decisions the Federal Reserve (the Fed) are making. Let us break it down for you.

Good News for Your Real Estate Goals: The Scoop on How Mortgage Rates Might Continue to Decline

The Federal Reserve has Paused Hikes on Interest Rates

One of the main objectives of the Fed is to curb inflation. In order to do this, they previously initiated a series of increases in the Federal Funds Rate, aiming to moderate economic growth. While this doesn’t exactly determine mortgage interest rates, it does have an effect.

Recently, we’ve seen a cooling down in inflation which indicates that the Fed’s rate hikes have been effective in bringing inflation down. Consequently, the Fed’s hikes have been less pronounced and less frequent since July (see the graph below):

Good News for Your Real Estate Goals: The Scoop on How Mortgage Rates Might Continue to Decline

In the last three meetings, the Fed has refrained from raising the Federal Funds Rate and has signaled potential rate cuts in 2024. According to the New York Times (NYT):

“Federal Reserve officials left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.”

This indicates the Fed’s confidence in the improvement of the economy and inflation. For you, this means that we could continue to see lower mortgage rates and better affordability for home owners.

Good News for Your Real Estate Goals: The Scoop on How Mortgage Rates Might Continue to Decline

Mortgage Rates on a Downward Trend

Mortgage rates are influenced by many factors – both inflation and the Fed’s actions (or recent lack thereof) play a significant role. Since the Fed put a pause on rate increases, the trajectory suggests that mortgage rates are likely to continue their downward trend (see the graph below):

Good News for Your Real Estate Goals: The Scoop on How Mortgage Rates Might Continue to Decline

While mortgage rates will still show some volatility, expert forecasts and recent patterns do suggest a potential downward trend in 2024. This is good news as you consider your goals! Lower rates would increase affordability for buyers, and will make the decision easier for sellers since they won’t be tethered to their currently lower mortgage rate.

Summing It Up

The Fed’s decisions have an indirect influence on mortgage rates and your affordability as a homeowner. By holding back from raising the Federal Funds Rate, there’s a likelihood that mortgage rates will continue to decline. To stay up to date on and in the loop on information and changes in the housing market, seek guidance from a trusted real estate expert.