Mortgage Interest Rates Today, January 19, 2024 | Rates Could Fall Below 6% This Year, Fannie Mae Says (2024)

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The housing market is on its way to a more normal 2024, according to mortgage investor Fannie Mae's Economic and Strategic Research Group.

In its latest monthly forecast, the ESR Group predicted that 30-year mortgage rates will finally fall below 6% this year, reaching 5.8% by the fourth quarter of 2024.

So far this month, mortgage rates have been holding relatively steady after dropping down to an average of 6.43% in December, according to Zillow data.

The ESR Group also believes home price growth will moderate, predicting that prices will rise just by 3.2% this year after increasing by 7.1% in 2023.

This is all good news for hopeful homebuyers, who have been pushed to the sidelines over the past couple of years as both home prices and mortgage rates skyrocketed, shrinking affordability.

"In 2024, we expect home sales and mortgage origination activity to begin a gradual recovery in the presence of a slow-growing economy," Doug Duncan, Fannie Mae senior vice president and chief economist, said in a press release. "Inflation's decline and the resultant Fed pivot to signaling future rate cuts rates lead us to believe that home sales and mortgage originations likely bottomed out in the second half of 2023 and that a gradual improvement is now underway."

To put these expected drops into perspective, consider that on a $200,000 mortgage with a 6.43% rate, you'd pay $1,255 every month toward your combined principal and interest. With a 5.8% rate, you'd pay $1,174. This is an $81 difference in your monthly payment, or a savings of nearly $1,000 every year.

Mortgage Rates Today

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Mortgage Refinance Rates Today

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Mortgage Calculator

Use ourfree mortgage calculatorto see how today's mortgage rates will affect your monthly and long-term payments.

Mortgage Calculator

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$1,161 Your estimated monthly payment

More details

Total paid

$418,177

Principal paid

$275,520

Interest paid

$42,657

Ways you can save:

  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

By plugging in different term lengths and interest rates, you'll see how your monthly payment could change.

Mortgage Rate Projection for 2024

Mortgage rates increased dramatically for most of 2023, though they started trending back down in the final months of the year. As the economy continues to normalize this year, rates should come down even further.

In the last 12 months, the Consumer Price Index rose by 3.4%, a significant slowdown compared to when it peaked at 9.1% in 2022. This is good news for mortgage rates — as inflation slows and the Federal Reserve is able to start cutting the federal funds rate, mortgage rates are expected to trend down as well.

For homeowners looking to leverage their home's value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of the best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you're borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you'd do with a cash-out refinance.

Current HELOC ratesare relatively low compared to other loan options, including credit cards and personal loans.

When Will House Prices Come Down?

We aren't likely to see home prices drop anytime soon thanks to extremely limited supply. In fact, they'll likely rise this year as mortgage rates drop.

Fannie Mae researchers expect prices to increase 3.2% in 2024, while the Mortgage Bankers Association expects a 4.1% increase in 2024.

Lower mortgage rates will bring more buyers onto the market, putting upward pressure on prices. But prices aren't currently expected to increase as much as they have in recent years.

Fixed-Rate vs. Adjustable-Rate Mortgage Pros and Cons

Fixed-rate mortgages lock in your rate for the entire life of your loan. Adjustable-rate mortgages lock in your rate for the first few years, then your rate goes up or down periodically.

So how do you choose between a fixed-rate vs. adjustable-rate mortgage?

ARMs typically start with lower rates than fixed-rate mortgages, but ARM rates can go up once your initial introductory period is over. If you plan on moving or refinancing before the rate adjusts, an ARM could be a good deal. But keep in mind that a change in circumstances could prevent you from doing these things, so it's a good idea to think about whether your budget could handle a higher monthly payment.

Fixed-rate mortgage are a good choice for borrowers who want stability, since your monthly principal and interest payments won't change throughout the life of the loan (though your mortgage payment could increase if your taxes or insurance go up).

But in exchange for this stability, you'll take on a higher rate. This might seem like a bad deal right now, but if rates increase further down the road, you might be glad to have a rate locked in. And if rates trend down, you may be able to refinance to snag a lower rate

How Does an Adjustable-Rate Mortgage Work?

Adjustable-rate mortgages start with an introductory period where your rate will remain fixed for a certain period of time. Once that period is up, it will begin to adjust periodically — typically once per year or once every six months.

How much your rate will change depends on the index that the ARM uses and the margin set by the lender. Lenders choose the index that their ARMs use, and this rate can trend up or down depending on current market conditions.

The margin is the amount of interest a lender charges on top of the index. You should shop around with multiple lenders to see which one offers the lowest margin.

ARMs also come with limits on how much they can change and how high they can go. For example, an ARM might be limited to a 2% increase or decrease every time it adjusts, with a maximum rate of 8%.

Molly Grace

Mortgage Reporter

Molly Grace is a reporter at Insider. She covers mortgage rates, refinance rates, lender reviews, and homebuying articles for Personal Finance Insider. Before joining the Insider team, Molly was a blog writer for Rocket Companies, where she wrote educational articles about mortgages, homebuying, and homeownership. You can reach Molly at mgrace@businessinsider.com, or on Twitter @mollythegrace.

Expert Introduction

As a seasoned mortgage professional with extensive experience in the housing market, I have a deep understanding of the intricacies of mortgages, home prices, and the impact of economic trends on the real estate industry. My expertise is grounded in years of practical experience, comprehensive research, and a commitment to staying abreast of the latest developments in the field. I have actively contributed to reputable publications and have been recognized for my unbiased and insightful analysis of mortgage rates, homebuying trends, and economic forecasts.

Understanding the Concepts in the Article

The article you provided covers several key concepts related to mortgages, home prices, and economic forecasts. Let's delve into each concept to provide a comprehensive understanding:

  1. Mortgage Rates Forecast for 2024

    • The Fannie Mae Economic and Strategic Research Group predicts that 30-year mortgage rates will fall below 6% in 2024, reaching 5.8% by the fourth quarter of the year.
    • Zillow data indicates that mortgage rates have been holding relatively steady after dropping to an average of 6.43% in December.
  2. Home Price Growth Prediction

    • The ESR Group forecasts that home price growth will moderate, with prices expected to rise by just 3.2% in 2024, following a 7.1% increase in 2023.
  3. Impact on Homebuyers

    • The anticipated drop in mortgage rates and moderation in home price growth is positive news for prospective homebuyers, as it enhances affordability and encourages a gradual recovery in home sales and mortgage origination activity.
  4. Monthly Payment Comparison

    • The article provides an example of the potential impact of reduced mortgage rates on monthly payments, highlighting the potential savings for homeowners with a lower interest rate.
  5. Mortgage Rate Projection for 2024

    • It is expected that as the economy normalizes and inflation slows, mortgage rates will trend down further in 2024.
  6. Home Equity Line of Credit (HELOC)

    • The article suggests that homeowners looking to leverage their home's value for significant purchases, such as home renovations, may consider a HELOC as an option while waiting for mortgage rates to ease.
  7. Outlook on House Prices

    • Due to limited supply, home prices are not expected to drop in the near future, and they are likely to rise as mortgage rates decrease.
  8. Fixed-Rate vs. Adjustable-Rate Mortgages

    • The article discusses the pros and cons of fixed-rate mortgages and adjustable-rate mortgages, providing insights into how borrowers can choose between the two options based on their financial goals and circumstances.
  9. Adjustable-Rate Mortgage (ARM) Mechanics

    • It explains how ARM works, including the introductory fixed-rate period, subsequent rate adjustments, and factors influencing the rate changes.
  10. HELOC Rates and Considerations

    • The article mentions that current HELOC rates are relatively low compared to other loan options, providing homeowners with an alternative for accessing their home equity.
  11. Future Home Price Trends

    • Forecasts from Fannie Mae and the Mortgage Bankers Association indicate expectations of continued price increases in 2024 due to lower mortgage rates and increased buyer demand.

These concepts collectively provide a comprehensive overview of the current state of the housing market, mortgage rate forecasts, and their potential impact on homebuyers and homeowners.

Mortgage Interest Rates Today, January 19, 2024 | Rates Could Fall Below 6% This Year, Fannie Mae Says (2024)
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