Will Mortgage Rates Drop Before the End of the Year?

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

KEY POINTS

  • As of mid-November, the average 30-year mortgage rate is 7.5%.
  • That's a drop of more than 25 basis points since late October.
  • While rates could fall modestly before 2023 wraps up, a major drop isn't very likely.

There's a reason so many home buyers have been struggling with the real estate market this year. Not only is housing inventory pretty low on a national scale, but home prices remain elevated because of that. Throw in the fact that it's gotten really expensive to sign a mortgage, and it's no wonder so many buyers are having a hard time.

In late October, the average 30-year mortgage rate was 7.79%. In mid-November, it dropped to 7.5%.

But let's be real -- mortgage lenders are still charging very high rates to borrow for a home. And things are unlikely to change significantly before the end of the year.

It's a matter of economic conditions

A big reason mortgage rates are up right now is that borrowing in general is expensive in the wake of the Federal Reserve's numerous interest rate hikes. The Fed has raised rates multiple times since early 2022 in an effort to slow the pace of inflation.

The Fed doesn't set mortgage rates, or any other consumer borrowing rates for that matter. Rather, the Fed sets the federal funds rate, which is what banks charge each other for short-term borrowing. But when that gets more expensive, financial institutions tend to pass the cost along to their customers. That explains why loan rates are generally elevated right now, whether it's on mortgages, car loans, or home equity loans.

The good news is that the Fed opted not to raise interest rates at its last two meetings. If the central bank decides it's made good progress with inflation, it may opt to start cutting rates in 2024. That could make borrowing less expensive on a whole in the new year -- mortgages included.

Near-term rate fluctuations will likely be minor

In the absence of a crystal ball, it's hard to say what the rest of 2023 has in store for mortgage rates. But chances are, if rates do continue to drop, they'll only do so to a modest degree. It's unlikely that we're going to see rates fall into the mid-6% range, for example, between now and Dec. 31.

But are 6% mortgages possible in 2024? Absolutely. There's a good chance that rates will grow increasingly competitive as the Fed gradually cuts rates, and that might happen in the new year.

That said, don't expect the record-low rates lenders were offering up in 2020 or 2021. We may not see rates like that for a really long time, and that's something buyers need to accept.

Of course, if you're eager to buy a home now, you may not want to sit tight and wait for rates to fall. So if you can afford to sign a mortgage based on today's rates, go for it.

Rates are apt to drop eventually, and at that point, you can look to refinance your loan. So as long as you're able to swing the cost of a mortgage now, you might as well buy if there's a suitable property for you so you can begin to reap the many benefits of being a homeowner.

Our Research Expert

Related Articles

View All Articles Learn More Link Arrow