Will Mortgage Interest Rates Go Lower?

Banks are tightening their lending standards due to increases in credit card and car loan delinquencies, according to Freddie Mac. This is also impacting mortgage applications, credit lines and refinance activity - loan originations were down approximately 30% in October 2023 from the previous year.  The good news is that mortgage delinquencies are low compared to other loan types.  Inflation is waning, but still remains above the Federal Reserve’s target of 2%. Consumer spending will decelerate due to slower economic and weaker employment growth which will cause rates to come down in 2024. Continuing homebuyer demand will keep home prices elevating 2.6% in 2024, but with rates dipping as low as 6%, housing will be a little more affordable.

If you’re planning to buy a home in 2024, Lending Tree recommends that you have at least a 3% down payment for a conventional loan –a loan that’s “originated, backed and serviced by private mortgage lenders like banks, credit unions and other financial institutions.” If you have less than 20% down, expect to pay for private mortgage insurance (PMI) between 0.14% and 2.33% of your loan amount in annual PMI premiums. To get the best interest rate and lower PMI premiums, your credit score must be at least 780 or higher, or you’ll pay a higher interest rate.