3 Myths Stopping Millennials and Gen Z From Buying a Home
Mortgage Rate Forecast for September 2024
Mortgage interest rates fell again after last week's inch up. The average 30-year fixed rate mortgage declined from 6.49% on Aug. 15 to 6.46% on Aug. 22, according to Freddie Mac.
"Although mortgage rates have stayed relatively flat over the past couple of weeks, softer incoming economic data suggest rates will gently slope downward through the end of the year. Earlier this month, rates plunged and are now lingering just under 6.5%, which has not been enough to motivate potential homebuyers. We expect rates likely will need to decline another percentage point to generate buyer demand."
— Sam Khater, Chief Economist, Freddie Mac
Will Mortgage Rates Go Down in September?
Mortgage rates fluctuated significantly in 2023, with the average 30-year fixed rate going as low as 6.09% on Feb. 2 and as high as 7.79% on Oct. 26, according to Freddie Mac. With the economy possibly heading into a recession, we may have already seen the peak of this rate cycle. Of course, interest rates are notoriously volatile and could tick back up on any given week.
Expert Mortgage Rate Predictions for September
"The July inflation numbers showed that prices are following a path that will allow for a Federal Reserve rate cut in September. Once the Fed begins easing, mortgage rates should follow their downward path as well. Look for the 30-year mortgage rate to remain in the mid-6% range in September."
— Molly Boesel, Senior Principal Economist, CoreLogic"September is the Fed Meeting most home market watchers have been looking forward to, in anticipation of the first Fed rate cut in over two years. This should create a sentiment that starts to bring interest rates down through the end of 2024. But for September, I believe a lot of rate reduction has been built into the market already based on speculation of a Fed cut. The 30-year fixed rate should average around 7% and the 15-year at 6.625%."
— Ralph DiBugnara, President, Home Qualified"The anticipation of a Fed rate cut in September has largely been factored into existing mortgage rates. However, if incoming data is weaker than expected, implying more aggressive rate cuts, there could be additional downward pressure on mortgage rates. Conversely, if the data demonstrates economic resilience and labor market strength, rates may stabilize or even rise. Some week-to-week volatility is expected as investors adjust their expectations based on new information, but we should see the 10-year Treasury yield at least stabilize or continue on a downward trend, leading to a gradual decline in mortgage rates throughout the rest of the year."
— Odeta Kushi, Deputy Chief Economist, First American"We expect mortgage rates to bounce around a bit over the next several weeks before falling to around the 6.4% mark by mid-to-late September. The short term volatility in rates will be due to expectations around the July PCE and August jobs report, but ultimately we expect rates to fall by 5-10 basis points as we approach the Fed meeting in September."
— Ralph McLaughlin, Senior Economist, Realtor.com"It seems that the market is already pricing in a Fed rate cut at its September meeting, so it's unlikely that we'll see mortgage rates fall dramatically if or when that happens. Rates have already come down by almost a full point after hitting a recent high of just over 7.5%; so a quarter-point cut by the Fed probably won't result in mortgage rates immediately plummeting. If the Fed doesn't cut rates, on the other hand, we could see mortgage rates spike back up over 7% almost instantly. Longer term, the spread between 10-year Treasury yields and rates on the 30-year mortgage are still much higher than usual — about 2.7 points, compared to the usual range of 1.5-2.0 points. This means that there's room for rates to come down meaningfully once the market is convinced that the Fed Funds rate will continue to go down over the next year. But the decline in mortgage rates is still more likely to be gradual than dramatic and sudden."
— Rick Sharga, Founder and CEO, CJ Patrick CompanyMortgage Interest Rates Forecast: Next 90 Days
As inflation ran rampant in 2022, the Federal Reserve took action to bring it down and that led to the average 30-year fixed-rate mortgage spiking in 2023. With inflation gradually cooling, the Fed adjusted its policies with skipped hikes and cuts are expected this year. Additionally, the economy showing signs of slowing has many experts believing mortgage interest rates will gradually descend in 2024. Of course, rates could rise on any given week or if another global event causes widespread uncertainty in the economy.
Mortgage Rate Predictions for Q3 2024
| Housing Authority | 30-Year Rate Forecast (Q3 2024) |
|---|---|
| Wells Fargo | 6.40% |
| Mortgage Bankers Association | 6.70% |
| Fannie Mae | 6.80% |
| National Association of Home Builders | 6.80% |
| National Association of Realtors | 6.90% |
| Average Prediction | 6.72% |
Current Mortgage Interest Rate Trends
Mortgage rates sit at their lowest level since May 2023. The average 30-year fixed rate decreased from 6.49% on Aug. 15 to 6.46% on Aug. 22. Similarly, the average 15-year fixed mortgage rate dropped from 5.66% to 5.62%.
Average 30-Year Fixed Rate by Month
| Month | Average 30-Year Fixed Rate |
|---|---|
| July 2023 | 6.84% |
| August 2023 | 7.07% |
| September 2023 | 7.20% |
| October 2023 | 7.62% |
| November 2023 | 7.44% |
| December 2023 | 6.82% |
| January 2024 | 6.64% |
| February 2024 | 6.78% |
| March 2024 | 6.82% |
| April 2024 | 6.99% |
| May 2024 | 7.06% |
| June 2024 | 6.92% |
| July 2024 | 6.85% |
Source: Freddie Mac
After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 23-year high in 2023. Many experts and industry authorities believe they will follow a downward trajectory into 2024. Dating back to April 1971, the fixed 30-year interest rate averaged around 7.8%, according to Freddie Mac — so today's rates are still below historical averages.
Mortgage Rate Trends by Loan Type
Many mortgage shoppers don't realize there are different types of rates in today's mortgage market. The best mortgage for you depends on your financial situation and your goals.
Jumbo Loans
Best for high-priced homes with great credit. Allow loan amounts above conforming loan limits, which max out at $766,550 in most parts of the U.S.
VA Loans
Almost always the right choice for veterans and service members. Backed by the U.S. Department of Veterans Affairs — ultra-low rates and no private mortgage insurance (PMI).
Conforming Loans
Great low-down-payment option. Allow as little as 3% down with FICO scores starting at 620.
FHA Loans
More lenient about credit — home buyers can often qualify with a score of 580 or higher. A less-than-perfect credit history might not disqualify you.
USDA Loans
Below-market rates for rural properties — similar to VA — with reduced mortgage insurance costs. Requires living in a rural area with moderate or low income.
Mortgage Rate Strategies for September 2024
Mortgage rates continue to display their famous volatility in 2024. Anticipated Fed cuts provide optimism for descending rates, but ongoing inflation battles keep them in check. The central bank held off on a rate hike in its past eight meetings, preferring to see if the economy would keep cooling organically. At the most recent meeting in July, the FOMC projected cuts starting as early as September.
Be Ready to Move Quickly
Indecision can lead to failure or missed opportunities. Although the housing market is becoming more balanced than the recent past, it still favors sellers. Prospective borrowers should get pre-approved (not pre-qualified) for their mortgage, so that the seller has some certainty about the deal closing. And be ready to close quickly — a long escrow period will put you at a disadvantage.
"Taking too long to decide to make an offer can lead to paying more for the home at best and at worst to losing out on it entirely. Buyers should get pre-approved (not pre-qualified) for their mortgage, so that the seller has some certainty about the deal closing. And be ready to close quickly — a long escrow period will put you at a disadvantage. And it's definitely not a bad idea to work with a real estate agent who has access to 'coming soon' properties, which can give a buyer a little bit of a head start competing for the limited number of homes available."
— Rick Sharga, Founder and CEO, CJ Patrick Company
Shopping Around Isn't Only for the Holidays
Since interest rates can vary drastically from day to day and from lender to lender, failing to shop around likely leads to money lost. Lenders charge different rates for different levels of credit scores. As the mortgage market slows due to lessened demand, lenders will be more eager for business.
"For potential home buyers, it's important to get quotes from multiple lenders for a mortgage, as rates can vary dramatically, especially during such a volatile period."
— Odeta Kushi, Deputy Chief Economist, First American
How to Shop for Interest Rates
Rate shopping doesn't just mean looking at the lowest rates advertised online. The rate lenders actually offer depends on:
- Your credit score and credit history
- Your personal finances
- Your down payment (if buying a home)
- Your home equity (if refinancing)
- Your loan-to-value ratio (LTV)
- Your debt-to-income ratio (DTI)
You should get three to five quotes at a minimum, then compare them to find the best offer. Look for the lowest rate, but also pay attention to your annual percentage rate (APR), estimated closing costs, and discount points — extra fees charged upfront to lower your rate.
Key Takeaway
September 2024 is a pivotal month for mortgage rates — the first Fed rate cut in over two years is expected, but much of that optimism is already priced in. Ralph DiBugnara predicts the 30-year fixed will average around 7% in September before trending down through year-end. The best move: get pre-approved, shop multiple lenders, and be ready to act decisively.
Originally published on The Mortgage Reports by Paul Centopani · August 22, 2024.
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