Mortgage Applications Are Surging as Rates Fall. Is Now the Time to Pounce?

In 2021, it was possible to sign a 30-year mortgage at a rate of under 3%. But mortgage lenders haven't offered those record-low rates since.

During the third quarter of 2023, the average 30-year mortgage rate came close to 8% at one point. Thankfully, though, rates have been falling in recent weeks. And as of this writing, the average 30-year mortgage rate is 6.66%. Compare that to 7.79% in late October, and today's rates look pretty sweet, even though they're still fairly high based on recent history.

Meanwhile, data from the Mortgage Bankers Association shows that buyers are looking to capitalize on the lower rates that have become available in early 2024. During the first week of the year, mortgage applications increased by 9.9% from a week prior.

If you're in the market for a new home, you may be eager to capitalize on lower mortgage rates, too. But now may not actually be the best time to submit a home loan application.

Waiting to apply for a mortgage could pay off

It's true that mortgage rates are more competitive now than they were at several points last year. But rates could fall further as 2024 moves along. So if you don't have a pressing reason to move early in the year, you may want to wait to apply for a mortgage.

The Federal Reserve is expected to cut interest rates at some point this year if inflation levels continue to recede. Now, the Fed is not in charge of setting mortgage rates. Those are established by lenders individually. However, when the Fed raises or lowers its benchmark interest rate, it tends to impact the cost of consumer borrowing across the board.

Right now, it's not just mortgages that are still fairly expensive to sign. Personal loans, auto loans, and home equity loans are also more expensive from an interest rate standpoint.

But if the Fed moves forward with rate cuts later on this year, consumers might benefit in the form of cheaper borrowing. So waiting to put a mortgage in place could be a smart move if you can manage to wait.

Also, right now, the U.S. housing market sorely lacks inventory. Listings may not pick up all that much because many homeowners want to hang onto the low mortgage rates they currently have. But if rates continue to fall, inventory could increase, so waiting could mean being privy to more selection.

How low might mortgage rates go in 2024?

It's hard to know the extent to which mortgage rates have the potential to fall this year. It's unlikely that the 30-year loan will drop much below the 6% mark, though depending on economic and market conditions, buyers may be pleasantly surprised.

Either way, it pays to do what you can to boost your credit score ahead of your mortgage application, because the higher that number is, the more competitive an interest rate you're likely to snag on a home loan. You can raise your credit score by paying bills on time, whittling down credit card balances, and making sure your credit report doesn't contain errors that paint you in a less favorable light.