Because when you borrow money from your home, your home acts as collateral. home equitylenders tend to offer lower interest rates than other loan options. For this reason mortgage loan interest ratesfor example, it is currently almost three times cheaper than credit cards. And they’re a few percentage points lower than personal loans. Still, the average home loan interest rate is currently 8.41%. And even higher for two common cases refund terms: 8.42% for 15-year mortgage and 8.50% for 10-year mortgage.

Knowing what mortgage interest rates are today and understanding the possibility of an ongoing rate-cutting campaign on behalf of the Federal Reserve, many homeowners may be wondering when mortgage rates will drop below 8%. with average amount of housing capital The answer to that question, currently around $330,000, could determine when homeowners may (or may not) decide to borrow money on their homes. Below we will discuss when this might happen.

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When will mortgage interest rates fall below 8 percent?

While it is impossible to predict interest rates with certainty, some factors could help push mortgage rates below 8%, but this will be a gradual process. Theoretically, the following factors could work together to cause rates on this product to fall below 8% in the first half of 2025:

Inflation

Like inflation Continuing to cool down will give more confidence to the Fed’s interest rate reduction steps. This rate stood at 2.4% in September (the next inflation reading will be released on November 13), just above the Fed’s 2% target. As it approaches or falls below this number, the Fed may continue to lower the federal funds rate.

And while this won’t cause mortgage interest rates to fall by the same measure, it will keep them on a downward trend, potentially leading them to fall below 8%. However, there is no need for a formal rate cut immediately after the next inflation report for interest rates to fall, as many lenders can pre-price the assumed reductions into their offers.

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Unemployment

Unemployment It is a critical barometer for measuring broader economic health. While currently low (only around 4%), changes here could also affect interest rates. For example, if unemployment rises, the Fed may lower interest rates to help. But if it stays the same or falls further, the Fed may take little or even no rate action in response. Monitoring the unemployment rate, then, is critical for those who want to time their mortgage application to secure the lowest rate.

Fed

Both inflation and unemployment numbers are actually just precursors to what the Fed will (or will not) do. But it is also important to read between the lines. While an official rate cut would be crucial, what Fed chairman Jerome Powell said about the potential for rate cuts going forward is also important because lenders are listening and making appropriate adjustments to their offers, including for home loans.

So if the federal funds rate is cut again in December and Powell hints after the meeting that additional cuts could be made in early 2025, lenders could begin lowering mortgage interest rates in response. This could potentially move borrowers closer to that 8% threshold sooner than initially expected.

In conclusion

Predicting when interest rates will fall into a certain range is impossible, as home buyers see it. Mortgage interest rates are falling and then a resurgence this fall may prove it. However, if inflation and unemployment figures remain stable, the Fed may argue that it should continue to lower interest rates, which could possibly lead to mortgage interest rates falling below 8% in the first half or even the first quarter of 2025. Economic factors, such as the pandemic in recent years, can cause rates to move unpredictably. Therefore, waiting brings with it natural risks. Debtors should weigh the arguments against taking action now to better determine their best course of action.

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