January Mortgage Rate Forecast in Anticipation of Spring

January Mortgage Rate Forecast in Anticipation of Spring: After going through a rough patch near the end of 2023, mortgage rates may not move much in January.

Mortgage rates are expected to go down in 2024, but it’s not certain that it will happen in January. Mortgage rates are not likely to go down by a large amount until the Federal Reserve lowers short-term interest rates. The economic world thinks that the first Fed rate cut will happen in the spring, after inflation has gone down for a few months in a row.

January Mortgage Rate Forecast in Anticipation of Spring: Why rates are likely to go down in 2024

Since mortgage rates tend to go up when inflation is high and down when inflation is low, those rates change with inflation. And if predictions about inflation come true, it will be good for shoppers and people who are taking out mortgages. Inflation is expected to slow down a lot in 2024, according to the Mortgage Bankers Association and Fannie Mae, a big bank that pools mortgages into securities.

In the last three months of 2023, the consumer price index averaged above 3%. The MBA and Fannie Mae think it will drop below 3% in the first three months of 2024 and even more throughout the year. The floor under mortgage rates will slowly go down if the predictions for inflation come true. The way down might make you think of taking a lift in a hospital: it’s very, very slow.

Changes at the end of 2023

From August to October 2023, on the other hand, borrowing rates went through the roof, but in November and December, they fell sharply:

At the start of August, the 30-year fixed-rate mortgage was less than 7%. By late October, it had reached its highest point of around 8%, a rise of more than 1% in just three months.

That rise was followed by a drop to below 6.5% in some parts of the second half of December. That’s a loss of about 1.5 percentage points in fifteen days.

These swings are caused by investors’ hopes and fears about the economy. The markets were scared when mortgage rates went up because the economy was still growing and prices were going up. Later, buyers became sure that inflation would keep going down and that the Federal Reserve would soon lower short-term interest rates. This caused mortgage rates to drop.

What could go wrong with this prediction

This prediction might not be right if mortgage rates move significantly in either way instead of staying about the same. If that happens, rates are more likely to go down than up. That’s what you think because you think mortgage rates will go down over the course of the year.

In January, if mortgage rates do go up, it will be because of an unexpected rise in inflation or another sign of economic growth.

Mortgage Rate 2024: Predicting The Rates This Year

What happened with December’s prediction?

I said at the beginning of December that mortgage rates would “likely slip a bit lower in December as inflation cools.”

That was too low of an estimate. Rates on mortgages didn’t just “slip a bit lower,” they went down a lot. Most 30-year mortgages had an APR of 6.7% in December. This was the first month since July that the APR was less than 7%.