Mortgage rates should continue declining this year as the U.S. economy weakens, inflation cools, and the Federal Reserve continues to cut interest rates.

The 30-year fixed mortgage rate is expected to fall to the low-6% range through the end of 2024, dipping into high-5% territory in 2025. Mortgage rates have already declined by over half a percentage point (0.5%) between May and September. Although the Federal Open Market Committee only began cutting the benchmark interest rate in its September meeting, markets often act in anticipation of future Fed policy decisions – among a host of other factors that move mortgage rates. Rates are still expected to continue moderating through the end of the year, especially if economic conditions continue weakening and merit several rounds of rate cuts over the next 18 months. However, rates aren’t expected to dip into the 3% or 4% range in the foreseeable future. Another reason mortgage rates are expected to fall is the abnormally large spread between the 30-year fixed mortgage rate and the yield on 10-year Treasury bonds. That spread is historically around 180 basis points, but it was closer to 300 basis points throughout most of 2023 – reflecting a diminished demand for mortgage-backed securities amid investor uncertainty.