When will mortgage rates go down?

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    Jordan Moore
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    Team StellarFi
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    It is difficult to say whether mortgage rates will rise or lower unless the Federal Reserve (aka the Fed) decides on concrete actions in its meeting scheduled for Dec. 12 and 13, 2023. The Fed may either increase, decrease, or leave the federal funds rates as it is based on factors like inflation, unemployment, and other economic conditions. 

    Experts and financial news sites, such as CBS, report they believe that the Fed may either increase or leave the federal funds rates untouched. A pause will keep the interest rates the same or near similar levels while an increase will increase the interest rates. The Fed lowering interest rates thought possible, is not likely, reports speculate.

    Mortgage rates have generally been high in 2023, fluctuating each week. As of November 14, the 30-year fixed-rate mortgage stood at 8.07% whereas only four days before that, on November 10, it was 7.87%. These rates are much higher compared to 2021 when the 30-year fixed mortgage rate stood at just 2.96%. Recent rates make it more difficult for potential homeowners to be able to afford to buy a home.

    For mortgage rates to decrease, the Fed has to take some major action. The Fed does not necessarily set mortgage rates, but it does set the federal funds rate. This impacts rates on consumer products rates like savings accounts and mortgages. The Fed is scheduled to meet on Dec. 12 and 13 to discuss federal fund rates. So far, over the past two meetings, the Fed has kept federal fund rates paused. 

    Over the past year and a half, since 2022, inflation has been on the rise to control consumer spending. The Fed intends to bring inflation back to 2%, according to Fed chair Jerome Powell. Mortgage rates will rise if the Fed decides to increase federal interest rates. 

    Interest rate cuts are unlikely but may happen in the second half of 2024 after first controlling inflation. At the same time, according to Fannie Mae’s Senior Vice President and Chief Economist Doug Duncan, consumers should not expect the rates of the 2010s since those rates were the result of the 2008 recession. Before that, from 1975-2009, the 30-year fixed-interest rates never dropped below 5%. The Fed will most likely pause interest rates in which case mortgage rates will remain close to or at the same levels as they currently are.

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StellarFinance, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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