Chicago Home Buyers Soon May Lock In Mortgages In 5 Percent Range

No doubt about it, interest rates are falling. If you are buying a home or refinancing, you could see 5 percent mortgages by the end of this year. And 4 percent over the next two years.

The downward slide toward the 5 percent interest rate bracket continues, sparking renewed interest by Chicago home buyers who hope to lock in an affordable mortgage this autumn and winter.

On September 26, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed home loan interest rates fell nationwide to the lowest level in two years.

Lenders now are quoting an average interest rate of 6.08 percent on 30-year fixed loans, down from 6.09 percent a week earlier. A year ago, the 30-year fixed loan average was 7.31 percent.

After Federal Reserve policy makers cut the federal funds rate by a hefty 50 basis points to a range of 4.75 to 5 percent, down from a two-decade high of 5.25 to 5.5 percent, at their mid-September meeting, experts are predicting interest rates likely will continue to move lower through early winter.

The Fed raised rates eleven times starting in early 2022 in an effort to curb sky-high inflation, pushing its targeted rate from near zero to 5.5 percent.

“Although last week’s decline was slight, the 30-year fixed-rate mortgage trended down to its lowest level in two years,” said Sam Khater, Freddie Mac’s Chief Economist.

“Given the downward trajectory of rates, refinance activity continues to pick up, creating opportunities for many homeowners to trim their monthly mortgage payment,” said Khater (left). “Meanwhile, many looking to purchase a home are playing the waiting game to see if rates decrease further as additional economic data is released over the next several weeks.”

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a 20 percent down payment and have excellent credit.

The Fed’s policy makers also signaled that they expect to cut their key rate by an additional half-point in their final two meetings of the year – in November and December. And they reportedly envision four more rate cuts in 2025 and two in 2026.

Assuming the proposed Fed rate cuts in 2025 and 2026 are the minimum 25 basis points, this action could push mortgage rates into the 4 percent range.

The Fed’s next policy meeting is November 6-7 – immediately after the presidential election. Experts say rate cuts by the Fed should lead to lower borrowing costs for home mortgages, auto loans, and credit cards. Lower rates also may entice homeowners to take out home equity loans to tap the rising cash value of their dwellings.

Realtors hopeful for home market rebound

The Fed’s rate cut, the first in more than four years, has sparked a wave of optimism among Realtors for a sales rebound in Chicago’s existing-home market.

Veteran real estate broker John Irwin of Baird & Warner is tracking what he calls a “hot” September market on the North Side as a result of falling interest rates.

“We traditionally get a sales bump in September, but this year the bump seems to be stronger than in past years,” noted Irwin (right). “The anticipation and implementation of interest rate cuts were obviously a major contributor, but there seems to be a new urgency for both buyers and sellers."

Irwin, who along with broker Jackie Lafferty compiles and releases the monthly Market Analysis for Chicago’s North Side, is predicting the September market results will give valuable insight into where the North Side market is going.

“It will be interesting to see if the Fed’s interest rate drop will extend the September bump into the fourth quarter of 2024, and whether sellers will be adding much-needed inventory to the market,” Irwin said.

Don DeBat is co-author of Escaping Condo Jail, the ultimate survival guide for condominium living. Visit escapingcondojail.com. For more housing news, visit www.dondebat.biz. Don also is writing Chicago’s Game, a book on 16-inch softball.