Will Mortgage Rates Drop to 6%? Here's What Experts Are Saying

When Will Mortgage Rates Drop to 6%? Here’s What Experts Predict

As we move through 2024, many homebuyers are keeping a close eye on mortgage rates. The good news is that experts believe mortgage rates could drop to 6% soon, but several factors will influence this change.

In June, we saw a cooling labor market which led to a drop in mortgage rates. Currently, the average mortgage rate for a 30-year fixed-rate loan is below 7%, a welcome relief for buyers who were facing rates over 8% just a few months ago. While a return to the 3% rates of 2020 and 2021 seems unlikely, a drop to 6% is more realistic.

Experts point to a potential Federal Reserve rate cut as a key factor. Melissa Cohn, Regional Vice President of William Raveis Mortgage, explains that "mortgage rates move with the 10-year bond yield. Cooling inflation has helped reduce bond yields, and mortgage rates are falling again."

Logan Mohtashami, Lead Analyst at HousingWire, notes that "the inflation growth rate has fallen significantly and is moving toward the Fed's 2% target. This softer labor market is a good sign for mortgage rates."

Mark Worthington, Branch Manager for Churchill Mortgage, adds that investor behavior in the mortgage-backed securities (MBS) market also plays a crucial role. "When investors see safer securities, they flock to the MBS markets, which should lower mortgage rates."

While we might not see a substantial drop immediately, we could be close. "For most borrowers, mortgage rates will drop to 6% with another month of data showing cooling inflation," says Cohn.

However, several factors could keep rates steady or cause them to rise. Strong employment data and rising inflation could counteract the potential drop. As Worthington puts it, "the biggest threats to mortgage rate cuts are more inflation and continued low unemployment numbers."

In summary, while we may not return to the record-low rates of the pandemic, a drop to 6% could be on the horizon. If you're a homebuyer, it might be worth considering your options, including adjustable-rate mortgages (ARMs) that offer lower rates than fixed-rate loans.

Stay tuned for updates, and let's navigate these changing rates together!