November 20, 2023
Financial pundits are noting that home loan interest rates are unlikely to fall as low as in July of 2020 when the rates moved below 3%.
Is it smart to wait to buy a home until well into the new year? Should we expect more of the same higher rates in the new year as we saw last year?
FHA Mortgage Rate Predictions For 2024
Business Insider repeats the Fannie Mae prediction for 2024 that rates may reside between 6.4% and 7.1% for 30-year fixed-rate conventional mortgages. FHA and VA mortgage rates are likely to be at or slightly below these numbers.
The National Association of Realtors takes a less conservative approach, predicting rates could fall as low as 6.1% in 2024.
These are predictions only, and various factors, including Fed policy changes and investor reactions to those changes, will contribute toward the interest rate environment in the new year.
Will FHA Mortgage Rates Fall Back To 3% In 2024?
Anything is possible in the new year, but assuming things continue at more or less the current pace, rates don’t seem likely to fall anywhere near the 3% range come 2024. It takes time to push low rates, and the right factors must be present.
Before the current rate spike, mortgage loan interest moved lower over an extended period until they reached the history-making below-3% range. But the conditions responsible for a 3% rate environment may not repeat in the same way next time.
Consider the observations of the Business Insider article mentioned above about the conditions that contributed to lower rates going into the pandemic:
“In response to the COVID-19 pandemic, the Fed cut the federal funds rate to near zero and purchased a large number of mortgage-backed securities to stave off an economic crisis.“
That is one set of factors that helped mortgage rates reach historic lows.
Should You Wait To Buy?
Some borrowers hope to wait out the current numbers and make their move when much lower mortgage rates are available. But these consumers will likely be waiting a long time. If you decide to ride out smaller home loan interest rate changes and make your decision when rates are closer to the mid-6% range? You likely won’t have to wait as long.
That said, your FICO scores and the debt you carry will be more of a factor in the current, more competitive housing market. Invest more time in your FICO scores and debts before applying.
Some house hunters decide to buy now and refinance later. Under the right circumstances, this can be a smart move, but be sure to consider the angles, the timing, and how much you save if you stay in the home long-term before rejecting this angle.
Consider a larger down payment and paying more on your mortgage each month. It is also a good idea to consider applying for an FHA adjustable rate mortgage.
These strategies may help you better manage higher rates and their long-term costs until they fall low enough to justify refinancing from an ARM loan or your current higher-rate loan.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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