I thought interest rates were coming down?!?!

Mortgage Rates Outlook for the Next 6-12 Months 

The mortgage landscape has been a rollercoaster ride over the past couple of years, with rates reaching historic lows during the pandemic, then starting to rise as the economy began to recover. As we look ahead to the next 6-12 months, potential homebuyers and homeowners considering refinancing are keenly interested in the direction mortgage rates will take. While no one can predict the future with absolute certainty, several key indicators can help paint a picture of where rates might be heading.

Economic Recovery and Inflation

A major factor influencing mortgage rates is the overall health of the economy. As we continue to emerge from the pandemic, the economic recovery's pace will play a critical role. If the economy grows too quickly, it could lead to inflationary pressures, which typically drive mortgage rates higher.

Inflation has been a hot topic in recent months, with significant increases in the cost of goods and services. The Federal Reserve has indicated a willingness to adjust monetary policy to combat high inflation, which could include raising the federal funds rate. Increases in this rate often lead to higher mortgage rates, as lenders need to maintain a profit margin above their borrowing costs.

Federal Reserve Policy

The Federal Reserve's actions are always a wild card in the mortgage rate forecast. The Fed does not directly set mortgage rates but influences them through its policy decisions. If the Fed raises interest rates to tackle inflation, as mentioned, this can indirectly lead to higher mortgage rates. However, if the Fed signals a more cautious approach to rate increases, mortgage rates may rise more slowly or even level off.

Housing Market Dynamics

The state of the housing market also impacts mortgage rates. High demand for homes has characterized much of the recent market, with inventory shortages driving up prices. If demand remains high and supply stays low, mortgage rates may continue to rise as lenders take advantage of a market willing to bear the cost.

Conversely, if housing prices begin to stabilize or decline, and inventory improves, there could be downward pressure on mortgage rates as lenders compete for a smaller pool of potential borrowers.

Global Economic Trends

Global economic trends cannot be ignored when considering the outlook for mortgage rates. International conflicts, trade relations, and major economies' fiscal policies can all affect the U.S. bond market. Mortgage rates often move in tandem with the yield on the 10-year Treasury note, so anything that influences investors' appetite for government bonds will impact mortgage rates.

Predictions for the Next 6-12 Months

Given the current economic indicators, the prediction for the next 6-12 months suggests that mortgage rates are likely to continue rise a bit more instead of come down as many of of thought would happen in 2024.  If inflation remains high, the Fed is likely to increase rates at least a few times over the next year, which would put upward pressure on mortgage rates.