The Federal Reserve recently made big news by lowering the federal funds rate for the first time in four years. This move will probably prompt lower mortgage rates, making now a good time for borrowers – who would do well to avoid a few common pitfalls.

Don’t mistake the Fed rate for mortgage rates.

Mortgage rates usually trend with the federal funds rate, but the two aren’t directly connected. While the Fed rate influences mortgage rates, so does inflation, the unemployment rate, the bond market, and the overall state of the U.S. economy. For example, when unemployment goes up, spending goes down, and mortgage rates can fall in reaction to that tightening of the economy.

Don’t assume you’ll get lender-advertised rates.

Saw a fantastic rate online? Don’t get overly excited. The lowest possible mortgage rates go to borrowers with the highest credit scores, usually 800 and above. Only about one in five Americans is in that group. The very best rates often go to borrowers who put down sizable down payments, as there’s less risk for lenders. Add in the requirements of high income and a low debt-to-income ratio, and the pool of people who get advertised mortgage rates is small.

Don’t wait for rates to go much lower.

Yes, rates may dip a little over the coming year. But there’s a built-in equalizer; lower rates mean more buyers in the market. That means more competition for homes, causing the prices of those homes to rise, offsetting any savings you might get with a slightly lower mortgage rate.

How low will mortgage rates go?

  • Business Insider predicts, “Rates probably won’t go back to the historic lows we saw in 2020 and 2021…Average 30-year mortgage rates are currently below 6%, and they may fall further into the 5% range next year.”
  • The Wall Street Journal also foresees a moderate downward shift, saying, “The consensus among industry professionals is that mortgage rates will decline in the last quarter of 2024.”
  • CBS News asked experts. LoanDepot executive Debbie Calixto thinks mortgage rates will hit the mid-5% range by the end of this year. Josh Green of the Barrett Financial Group agrees, saying, “We’ll hit around 5.5% to 5.75% by the end of 2024.”

While rates may see slight fluctuations over the coming months, they’re overall stable and historically attractive. Making now a great time to finance your dream home. To talk about the possibility, call us at (972) 591-3097 or connect with us online.