I expect more ups and downs to mortgage rates in October with any net change being muted.
— Greg McBride, Bankrate Chief Financial Analyst
Mortgage rate predictions October 2024
If you’ve been holding out for lower mortgage rates, they’re finally here. The average 30-year mortgage rate began falling from 7 percent in mid-July, and landed just under 6.2 percent as of late September.
However, mortgage rates might not fall as precipitously this month, even with the likelihood of future Federal Reserve rate cuts. The Fed cut its benchmark rate on Sept. 18 — the first reduction since the pandemic. While the Fed doesn’t directly set mortgage prices, it does influence them.
“After steadily declining throughout the summer months, I expect more ups and downs to mortgage rates in October with any net change being muted,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “Job market data will be closely watched as well as any clues from the Fed about the extent of upcoming interest rate cuts.”
How much lower could mortgage interest rates go?
Mortgage rates have already pulled back, with the 30-year loan averaging 6.24 percent as of Sept. 25, according to Bankrate’s weekly lender survey.
Still, rates might not come down as low as some homeowners hope, as forecasters previously baked in the September rate cut. In fourth quarter 2024 outlooks, both Fannie Mae analysts and the Mortgage Bankers Association anticipate 30-year rates at 6.2 percent, while the National Association of Realtors projects 6.7 percent.
Will Fed cuts stop the housing market roller coaster?
Current mortgage rate trends
Higher mortgage rates have kept homeowners locked in to lower-cost loans. Meanwhile, the median home price surged to a record $416,700 in August, according to the National Association of Realtors.
“Given the downward trajectory of rates, refinance activity continues to pick up, creating opportunities for many homeowners to trim their monthly mortgage payment,” says Sam Khater, chief economist at Freddie Mac. “Meanwhile, many looking to purchase a home are playing the waiting game to see if rates decrease further as additional economic data is released over the next several weeks.”
That data could pave the way for further Fed cuts, and a continued decline in mortgage rates.
“We continue to see the slowdown in inflation,” says Luke Tilley, chief economist at M&T Bank/Wilmington Trust. “That’s context for expecting more rate cuts.”
What to do if you’re getting a mortgage now
- Improve your credit score. A lower credit score won’t prevent you from getting a loan, but it can make all the difference between getting the lowest possible rate and more costly borrowing terms. The best mortgage rates go to borrowers with the highest credit scores, usually at least 740.
- Save up for a down payment. Putting more money down upfront can help you obtain a lower mortgage rate, and if you have 20 percent, you’ll avoid mortgage insurance, which adds costs to your loan. If you’re a first-time homebuyer and can’t cover a 20 percent down payment, there are loans, grants and programs that can help. The eligibility requirements vary by program, but are often based on factors like your income.
- Understand your debt-to-income ratio. Your debt-to-income (DTI) ratio compares how much money you owe to how much money you make, specifically your total monthly debt payments against your gross monthly income. Not sure how to figure out your DTI ratio? Bankrate has a calculator for that.
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It might seem like a bank or lender are dictating mortgage terms, but in fact, mortgage rates are not directly set by any one entity. Instead, mortgage rates grow out of a complicated mix of economic factors. Lenders typically set their rates based on the return they need to make a profit after accounting for risks and costs.
The Federal Reserve doesn’t directly set mortgage rates, but it does set the overall tone. The closest proxy for mortgage rates is the 10-year Treasury yield. Historically, the typical 30-year mortgage rate was about 2 percentage points higher than the 10-year Treasury yield. In 2023, that “spread” was more like 3 percentage points. -
Deciding when to refinance is based on many factors. If rates have fallen since you originally took out your mortgage, refinancing might make sense. A refi can also be a good idea if you’ve improved your credit score and could lock in a lower rate or lower fees. A cash-out refinance can accomplish that as well, plus give you the funds to pay for a home renovation or other expenses.