Mortgage rates have remained elevated since last year, with the average rate for a 30-year loan sitting at 6.94% in the week ending May 23.
The elevated mortgage rates and high home prices have priced out many hopeful buyers out of the housing market. Mortgage rates are also likely to remain elevated through 2024, with forecasts from Fannie Mae estimating that the rate for the 30-year loan could increase to 7.1% in the coming quarters before easing slightly at the end of 2024.
Despite the grim forecast, experts who spoke with CBS News said there are certain conditions that could help lower the country's mortgage rates.
The Federal Reserve Lowers Their Benchmark Rate
The Federal Reserve does not directly set mortgage rates. However, changes it makes to the federal funds rate indirectly influence mortgage rates and consumer interest rates. Between 2022 and 2023, the Fed increased its benchmark rate by 5.25% over 16 months. This indirectly resulted in an equally historic surge in mortgage rates over the last two years, peaking at 8.01% in October 2023.
Rates have fallen ever since, but Jason Obradovich, chief investment officer at New American Funding, said mortgage rates could fall further if the Fed makes cuts.
"Mortgage rates will not fall until either the Federal Reserve lowers their benchmark rate, or they indicate that they will lower interest rates very soon," he told the outlet. "If the Fed doesn't end up lowering rates or starts signaling that they don't intend to lower rates in 2024, then we could actually see mortgage rates move higher as the market adjusts to this new reality."
The Inflation Rate Drops
In addition to the Fed's rate cuts, Melissa Cohn, regional vice president at William Raveis Mortgage, said a drop in inflation rates could help lower mortgage rates. The inflation rate has so far hovered around 3.7%.
The Spending Rate Falls
Ralph DiBugnara, founder and president of Home Qualified, said a drop in mortgage rate or an interest rate cut from the Fed is unlikely until the country sees consecutive months of lower inflation and there are signs that consumer spending has slowed.
The 10-Year Treasury Bond Yield Falls
The 10-year Treasury bond serves as an indicator of long-term interest rates. As such, Cohn said mortgage rates would fall if the yield of the 10-year Treasury bond also drops.
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