Mortgage rates have inched up a bit this month. In January, 30-year mortgage rates averaged 6.34%, but they were around eight points higher than this last week, according to Zillow data, Rates shouldn’t increase too much further, but it may be a few months before we see them drop.

Experts have forecasted that mortgage rates will go down in 2024, but exactly when they’ll start trending down depends on the economy and when the Federal Reserve starts lowering the federal funds rate. 

Fed officials have indicated they may cut rates at least three times this year, which should allow mortgage rates to decrease. Though mortgage rates aren’t directly impacted by the Fed, investor expectations of how Fed changes will impact the overall economy can push mortgage rates up or down. 

Hopeful homebuyers waiting for lower rates may finally have some luck this summer — though those who wait until next year will likely see even lower rates

Mortgage Rate Projection for 2024

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased dramatically in 2022 and throughout most of 2023.But many forecasts expect rates to fall this year now that inflation has been coming down. In the last 12 months, the Consumer Price Index rose by 3.4%, a significant slowdown compared when it peaked at 9.1% in 2022. 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 our 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.

When Will House Prices Come Down?

We aren’t likely to see home prices drop this year. In fact, they’ll probably rise. Fannie Mae researchers expect prices to increase 3.20% in 2024 and 0.30% in 2025, while the Mortgage Bankers Association expects a 4.10% increase in 2024 and a 3.30% increase in 2024.

Sky high mortgage rates have pushed many hopeful buyers out of the market, slowing homebuying demand and putting downward pressure on home prices. But rates have since eased, removing some of that pressure. The current supply of homes is also historically low, which will likely push prices up.

What Happens to House Prices in a Recession?

House prices usually drop during a recession, but not always. When it does happen, it’s generally because fewer people can afford to purchase homes, and the low demand forces sellers to lower their prices.

How Much Mortgage Can I Afford?

A mortgage calculator can help you determine how much house you can afford. Play around with different home prices and down payment amounts to see how much your monthly payment could be, and think about how that fits in with your overall budget.

Typically, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means your entire monthly mortgage payment, including taxes and insurance, shouldn’t exceed 28% of your pre-tax monthly income.

The lower your rate, the more you’ll be able to borrow, so shop around and get preapproved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than what your budget can comfortably handle.

The Bottom Line