Inflation data will be the catalyst for movement in mortgage rates this summer. — Greg McBride, Bankrate Chief Financial Analyst

Mortgage rate predictions July 2024

For much of the first half of 2024, inflation propelled and kept 30-year mortgage rates at 7 percent.

In July, it’ll continue to impact the cost of mortgages, says Greg McBride, CFA, Bankrate’s chief financial analyst.

“Inflation data will be the catalyst for movement in mortgage rates this summer,” McBride says.

One gauge, the Consumer Price Index, slowed to 3.3 percent on an annual basis in May — though at the same time, the shelter component, which looks at market rate rent prices, went up.

The Federal Reserve also pays special attention to another inflation measure, the Personal Consumption Expenditures Price Index. That reading came in at 2.6 percent in May.

That hasn’t swayed the Fed yet, which has been keeping interest rates high to help coax inflation back to 2 percent. At the central bank’s June meeting, policymakers again left rates unchanged, but also indicated the possibility for one rate cut before the year’s out.

That revised likelihood should keep rates as-is for now.

“Mortgage rates will remain steady [in July], since the Federal Reserve rate cut will be far out to very late this year,” says Lawrence Yun, chief economist of the National Association of Realtors.

“It’s unlikely that mortgage rates will experience any major swings in July,” says Odeta Kushi, deputy chief economist at First American. “The 30-year, fixed mortgage rate is likely to hover in the high 6 percent range.”

“As we enter July, I anticipate stable rates with a slight decrease,” says Tanya Ball, mortgage regional manager at BOK Financial. “According to reports from the National Association of Realtors, inventory has received a boost, showing a 6.7 increase in May and an 18.5 rise compared to last year. Although still below optimal levels, this progress represents a step in the right direction.”

“Given the current stance of the Federal Reserve, the strong performance of the U.S. economy and relatively low unemployment figures, mortgage rates are likely to remain elevated in July,” says Haseeb Rahman, portfolio manager at Palisades Group.

When will mortgage interest rates go down?

Thirty-year fixed mortgage rates parallel the 10-year Treasury yield. When investors face unknowns — including Federal Reserve uncertainty — they turn to safer instruments like 10-year Treasury notes, which are fully backed by the federal government. This pushes the prices of notes up and their yields down. When yields fall, so do 30-year mortgage rates.

“If the spread between the 10-year Treasury bond yield and the 30-year mortgage rate narrows, then mortgage rates can decline even before the Federal Reserve’s rate cut,” Yun says, “but given the uncertain outlook for community and regional banks, the spread is not likely to narrow.”

“Even if the Fed starts cutting rates this year, mortgage rates won’t get down to, or below, 6 percent unless there is a significant economic slowdown,” McBride says.

Even with those what-ifs, forecasters have started to align much more closely on longer-term projections.

Fannie Mae analysts anticipate 6.7 percent rates in the fourth quarter of the year, while Freddie Mac researchers expect rates at or above 6.5 percent. In its June outlooks, the Mortgage Bankers Association predicted 6.6 percent rates by the fourth quarter. The National Association of Realtors predicts 6.7 percent.

Current mortgage rate trends

The average interest rate on a 30-year fixed mortgage was 7.02 percent as of June 26, according to Bankrate’s survey of lenders.

Over the first six months of the year, the 30-year rate was at its lowest in January, at 6.84 percent, and at its highest in May, at 7.39 percent.

Higher mortgage rates have kept homeowners locked in to lower-cost loans. Meanwhile, the median home price surged to $419,300 in May, according to the Realtors group.

“It’s a challenging market for potential first-time homebuyers, who are facing an affordability double-whammy of elevated mortgage rates and rising house prices,” Kushi says. “Without the equity from the sale of an existing home, these buyers are at a disadvantage. However, if the recent uptick in inventory and slowing annual price appreciation continue, along with a moderation in mortgage rates, it may bring some affordability-constrained buyers off the sidelines.”

Bankrate’s weekly mortgage rate averages differ slightly from the statistics reported by Freddie Mac, the government-sponsored enterprise that buys mortgages and packages them as securities. Bankrate’s rates tend to be higher because they include origination points and other costs, while Freddie Mac removes those figures and reports them separately. However, both Bankrate and Freddie Mac report similar overall trends in mortgage rates.

What to do if you’re getting a mortgage now

Mortgage rates are still at generational highs, but the basic advice for getting a mortgage applies no matter the economy or market:

  • Improve your credit score. A lower credit score won’t prevent you from getting a loan, but it can make all the difference between getting the lowest possible rate and more costly borrowing terms. The best mortgage rates go to borrowers with the highest credit scores, usually at least 740.
  • Save up for a down payment. Putting more money down upfront can help you obtain a lower mortgage rate, and if you have 20 percent, you’ll avoid mortgage insurance, which adds costs to your loan. If you’re a first-time homebuyer and can’t cover a 20 percent down payment, there are loans, grants and programs that can help. The eligibility requirements vary by program, but are often based on factors like your income.
  • Understand your debt-to-income ratio. Your debt-to-income (DTI) ratio compares how much money you owe to how much money you make, specifically your total monthly debt payments against your gross monthly income. Not sure how to figure out your DTI ratio? Bankrate has a calculator for that.