Mortgage rates, which averaged 6.63% this week, could come under pressure after the Federal Reserve left key short-term interest rates unchanged on Wednesday, signaling the possibility of future rate cuts, according to Freddie Mac. Housing analysts point out that the Economists expect the real estate market to be even stronger this year if interest rate forecasts come true.
Although the Fed rate does not directly affect mortgage rates, it often does affect mortgage rates.
Jessica Lautz, deputy chief economist at the National Association of REALTORS®, expects mortgage rates to remain in the 6% range for most of this year. “While this is certainly higher than the historic lows seen in 2020 and 2021, it is lower than the historical norm of 7.74%,” Lautz said.
With mortgage interest rates less volatile, consumers may be able to resume their home search with more confidence. Last fall, mortgage rates rose to nearly 8%, shaking buyer confidence and causing a drop in home sales. This week's average of 6.63% means your typical monthly mortgage payment will be about $251 lower than when interest rates peaked, Lautz said.
Sam Carter, chief economist at Freddie Mac, said mortgage rates have remained relatively stable for nearly two months, bringing more buyers back into the housing market. Additionally, “the economy continues to outperform with strong employment and income growth, while household formation is increasing at a faster pace than pre-pandemic levels,” he said. “These favorable factors should provide fundamental support to the market in the coming months.”
NAR Chief Economist Lawrence Yun added that lower mortgage rates are contributing to increased housing affordability. Pending home sales increased 8.3% in December and are now higher than a year ago, according to NAR's latest housing report.
Homeowners may also have more incentive to sell. “Many home sellers whose home sales are slow due to changes in living conditions may be willing to waive interest rates of 3% to 4%, which will increase inventory,” Yun said. he says. “Home sales will definitely increase this year.” NAR predicts existing home sales will increase 13% compared to 2023. This upward trend will continue until 2025, with an additional 15.8% increase, NAR says.
Freddie Mac reports the national average mortgage rates for the week ending February 1 as follows:
- 30 year fixed rate mortgage: The average was 6.63%, down from last week's average of 6.69%. At this time last year, 30-year interest rates averaged 6.09%.
- 15 year fixed rate mortgage: The average was 5.94%, down from last week's average of 5.96%. A year ago, the average 15-year interest rate was 5.14%.
