A year of Spikes and Cuts
By Wendy Murphy
As we look back on 2024, the year brought a mix of spikes and cuts. The 30-year fixed mortgage rate began the year at 6.625%, peaked at 7.125% in May, dipped to a low of 5.75% in September, and ended the year back at 6.625%, according to Steve Turinsky, Vice President of GreenState Mortgage.
The largest spike in interest rates occurred in October 2024, which was driven by concerns over the growing U.S. deficit and optimism about the economy. This led to market volatility which pushed the rates upward. However, the Federal Reserve stepped in to provide relief through a series of rate cuts later in the year.
In 2024, the Federal Reserve cut rates three times, marking the first reductions since March of 2020. While the federal funds rate influences home equity lines of credit, credit card rates, and other borrowing costs, it doesn’t directly determine long-term mortgage rates. The ripple effect it has on the economy and financial markets, however, indirectly impact them. Long-term mortgage rates are more closely tied to the 10-year Treasury bond yield since both are influenced by similar economic factors.
2025 Interest Rate Predictions
In December 2024, the Federal Reserve indicated that 2025 might see just two rate cuts, fewer than the three initially expected by economists. Fannie Mae predicts that 30-year mortgage rates will decline slightly, reaching 6.30% by the end of Q4 2025. Although these rates remain higher than the historic lows of recent years, they are still relatively low compared to past decades.
To put it in perspective:
- The highest recorded mortgage rate was 18.53% in October 1981.
- The lowest recorded rate was 2.65% in January 2021.
As someone who worked as a mortgage banker in the early 1990s, I remember the excitement when rates first dipped below 8%, which created a frenzy among homebuyers and homeowners refinancing higher-rate mortgages. Since 1971, mortgage rates below 7% have been relatively uncommon, occurring mainly between 2001 and 2021. By putting current interest rates into perspective shows that opportunities are still very much available for homebuyers.
