irina88w/GettyImages; Illustration: Hunter Newton/Bankrate
Mortgage rates will trend lower in September, but the road ahead will not be smooth.
— Greg McBride, Chief Financial Analyst, Bankrate
Mortgage interest rates forecast for September 2024
If you’ve been waiting for mortgage rates to fall, your day has finally come. The average interest rate on a 30-year mortgage has begun to fall from 7% in mid-July to just under 6.5% as of late August.
However, mortgage rates may not fall as sharply this month, even though the Federal Reserve may cut interest rates. With inflation subdued, the Fed is set to cut rates at its next meeting on September 18. It would be the first rate cut since the pandemic began. While the Fed does not directly set mortgage prices, it does influence interest rates, and mortgage prices have been trending lower with the rate cut looming.
“Mortgage rates are trending lower in September, but the road ahead will be bumpy,” said Greg McBride, CFA, chief financial analyst at Bankrate. “Economic data such as weak employment data will likely spur mortgage rate movements more than a reaction to a long-anticipated Fed rate cut.”
“Mortgage rates will fluctuate over the coming weeks, but we expect them to be between 6.2% and 6.4% by the end of the year,” said Lisa Sturtevant, chief economist at Bright MLS.
When will mortgage rates fall?
Mortgage rates have already started to fall, with the average rate for a 30-year loan standing at 6.48% as of Aug. 28, according to Bankrate’s weekly survey of lenders.
Still, rates may not fall as much as some homeowners hope, as forecasters had already factored in the September rate cut. Looking ahead to the fourth quarter of 2024, Fannie Mae analysts are forecasting 30-year rates at 6.4%, while the Mortgage Bankers Association is predicting 6.5%. The National Association of Realtors is forecasting 6.7%.
Current trends in mortgage interest rates
The average interest rate on a 30-year fixed mortgage was 6.48% as of Aug. 28, according to a Bankrate survey of lenders. The last time rates were that low was in 2023.
Rising mortgage rates are keeping homeowners locked into low-cost loans, while the median home price soared to a record $422,600 in July, according to the National Association of Realtors.
“Lower mortgage rates make it more affordable for buyers,” Sturtevant says, “but lower rates also make it easier for existing homeowners to sell. Nationwide, there is an average 3 percentage point difference between interest rates on new and existing mortgages. This rate differential can prevent some homeowners from selling their homes. When interest rates fall, the interest rate differential becomes less of an obstacle for sellers.”
“Continued improvements in mortgage rates are expected to drive further home sales,” says Skylar Olsen, chief economist at Zillow. “But we’re also entering a period of uncertainty for reasons that are often overlooked in econometric models: growing confidence in upcoming Federal Reserve rate cuts, buyer behavior that may wait for further rate reductions, and significant uncertainty surrounding the approaching election. These factors could influence key decisions and impact existing home sales as we approach the end of the year.”
Bankrate’s average weekly mortgage rates differ slightly from statistics reported by Freddie Mac, a government-sponsored company that buys and securitizes mortgages. Bankrate’s rates tend to be higher because they include origination points and other fees, while Freddie Mac excludes those figures and reports them separately. However, both Bankrate and Freddie Mac report similar overall trends in mortgage rates.
What to do if you want to get a mortgage now
- Improve your credit score. While a low credit score won’t prevent you from getting a loan, your score will play a big role in whether you get the lowest interest rate or more expensive borrowing terms. The best mortgage rates are usually available to borrowers with credit scores of 740 or above.
- Save for a down payment. Putting a larger down payment initially can help you get a lower mortgage interest rate. A 20 percent down payment also helps you avoid mortgage insurance, which adds to the cost of your loan. If you’re a first-time homebuyer and can’t come up with a 20 percent down payment, there are loans, grants, and programs that can help. Eligibility requirements vary by program but are often based on income and other factors.
- Understand your debt-to-income ratio. Your debt-to-income ratio (DTI) compares the amount of debt you owe to your income, specifically your total monthly debt payments compared to your total monthly income. If you don’t know how to calculate your DTI ratio, Bankrate has a calculator.
