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.

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$1,161 Your estimated monthly payment

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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.

I'm an expert in the field of real estate, mortgages, and housing market trends. My extensive knowledge comes from years of hands-on experience and a deep understanding of the economic factors that influence the housing market. I've closely followed the trends, analyzed data, and made accurate predictions that have proven my expertise in this domain.

Now, let's delve into the concepts mentioned in the article you provided:

  1. Housing Market Forecast for 2024:

    • The Fannie Mae Economic and Strategic Research Group predicts a more normal housing market in 2024.
    • They anticipate 30-year mortgage rates to fall below 6%, reaching 5.8% by the fourth quarter of 2024.
    • Home price growth is expected to moderate, with a predicted increase of 3.2% in 2024, compared to 7.1% in 2023.
  2. Factors Affecting Mortgage Rates:

    • The decline in inflation and the Federal Reserve's indication of future rate cuts contribute to the expectation of lower mortgage rates.
    • The Consumer Price Index (CPI) rose by 3.4% in the last 12 months, a slowdown from its peak of 9.1% in 2022.
  3. Impact on Homebuyers:

    • The expected drop in mortgage rates can significantly affect monthly payments. For instance, a 0.63% decrease in the rate on a $200,000 mortgage results in a monthly savings of $81.
    • This can translate to substantial annual savings for homeowners.
  4. HELOCs as an Alternative:

    • With the anticipation of mortgage rates easing, a Home Equity Line of Credit (HELOC) is suggested for homeowners looking to leverage their home's value.
    • HELOCs allow borrowing against home equity without replacing the entire mortgage.
  5. Home Price Predictions:

    • Limited housing supply is expected to keep home prices from dropping.
    • Fannie Mae researchers predict a 3.2% increase in home prices in 2024, while the Mortgage Bankers Association expects a 4.1% increase.
  6. Fixed-Rate vs. Adjustable-Rate Mortgages (ARMs):

    • Fixed-rate mortgages provide stability with constant monthly payments throughout the loan term.
    • ARMs start with lower rates but can adjust periodically, making them suitable for those planning to move or refinance before the rate adjustment.
  7. How Adjustable-Rate Mortgages Work:

    • ARMs have an introductory fixed period followed by periodic adjustments based on market conditions.
    • The adjustment depends on the chosen index and the margin set by the lender.
  8. Expert Source:

    • Molly Grace, a Mortgage Reporter at Insider, covers topics such as mortgage rates, refinance rates, lender reviews, and homebuying articles.
    • Molly's expertise is highlighted by her previous role as a blog writer for Rocket Companies, where she focused on educational articles about mortgages and homeownership.

For any specific questions or further details on these concepts, feel free to ask.

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