Reasons Why Mortgage Rates Might Keep Falling

Why Mortgage Rates Could Continue To Decline

As you delve into information about the real estate market, you're likely to encounter details regarding inflation and recent choices made by the Federal Reserve (the Fed). But how do these factors influence you and your plans to buy a home? Here's the essential information you should be aware of.

The Federal Funds Rate Hikes Have Stalled

One of the primary objectives of the Fed is to reduce inflation. To achieve this, they initiated an increase in the Federal Funds Rate to moderate economic activity. Although this doesn't directly dictate mortgage rates, it does exert an influence.

Lately, there has been a noticeable decline in inflation, indicating that these rate hikes have been effective in bringing inflation under control. Consequently, the Fed's increments have become less significant and less frequent. In fact, there have been no increases since July, as depicted in the graph below:

Furthermore, the Federal Reserve has not only refrained from increasing the Federal Funds Rate in the last three committee meetings but has also indicated the possibility of rate cuts in 2024. As reported by 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 suggests that the Fed perceives improvements in the economy and inflation. Why does this matter to you and your homebuying plans? It could potentially result in lower mortgage rates and enhanced affordability.

Mortgage Rates Are Coming Down

Mortgage rates are influenced by a wide variety of factors, and inflation and the Fed’s actions (or as has been the case recently, inaction) play a big role. Now that the Fed has paused the increases, it looks more likely mortgage rates will continue their downward trend (see graph below):


Although mortgage rates may remain volatile, their recent trend combined with expert forecasts indicate they could continue to go down in 2024. That would improve affordability for buyers and make it easier for sellers to move since they won’t feel as locked-in to their current, low mortgage rate.

Bottom Line

The decisions made by the Federal Reserve exert an indirect influence on mortgage rates. With the Federal Funds Rate remaining unchanged, there is a likelihood that mortgage rates will persist in their downward trend. For accurate insights into how these changes in the housing market may affect you, trust a reliable real estate expert to provide expert advice.

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