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Three Key Factors That Could Cause Mortgage Rates to Drop in 2024

As we look ahead to 2024, many homeowners, prospective homebuyers, and investors are keenly interested in the trajectory of mortgage rates. Here are a few factors that could lead to a drop in mortgage rates in 2024.

1).Inflation– Inflation erodes the purchasing power of dollars over time. Lenders generally maintain interest rates at a level sufficient to overcome this erosion. If inflation drops, then mortgage rates typically follow suit.

2).Economic Growth– Economic indicators, such as gross domestic product (GDP) and the employment rate, also influence mortgage rates. In a slowing economy, employment and wages decline, leading to decreased demand for home loans. Thus, slower economic growth could result in lower mortgage rates.

3).Federal Reserve Monetary Policy- If the Federal Reserve decides to lower the Fed Funds rate or increase the money supply, this could lead to lower mortgage rates.

Of course some form of combination of all three could easily happen next year. If that happens expect rates to make a sharp decline.

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