Mortgage Rates May Remain Elevated Even After Fed Rate Cuts

As the Federal Reserve prepares to lower interest rates later this year, mortgage rates might not decrease quickly given that demand for mortgages and mortgage-backed securities remains muted compared to pre-2022 levels. This decreased demand, coupled with reduced purchasing of these securities by the Fed and a decline in the volume of mortgages originated by banks due to fewer home purchases and refinancings, is expected to result in sustained higher interest rates for homebuyers. Fannie Mae’s economists have updated their Q4 2024 forecast for mortgage rates from 5.9% to 6.4%, with the current rate averaging 6.87%.

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