Mortgage rates have risen significantly over the past couple of years, going from an average of 3.05% in mid-October of 2022 to a high of 7.57% last week. This trend has caught a lot of home buyers off guard. Even some economists and mortgage industry analysts have been surprised by how much rates have risen over the past 24 months.
Today, we will explain how this affects borrowers who plan to use a VA home loan in 2024. We’ll provide an update on where we are right now, along with a VA mortgage rate outlook and forecasts stretching into 2024.
The truth is, no one can predict future interest rate trends with complete accuracy. So we can’t say for sure what VA mortgage rates will do in 2024. But you might be happy to hear that several analysts have predicted a gradual decline in the near future.
Where We Are Now
When this article was published, in late October 2023, the average rate for a 30-year fixed mortgage loan had just climbed to 7.57%. This is based on the weekly mortgage industry survey conducted by Freddie Mac, The government-sponsored enterprise that purchases home loans from lenders.
Note: Freddie Mac’s survey does not distinguish between different loan types. They do not have a separate survey for conventional, FHA and VA loans. Instead, their surveys and forecasts include all types of mortgage loans. But it’s still one of the best indicators available to us.
As mentioned in the introduction, the average rate for a 30-year fixed mortgage loan (VA or otherwise) has more than doubled over the past couple of years. Here’s a quick recap on how we got to this point:
- During much of 2020, and through all of 2021, 30-year mortgage rates were averaging in the high 2% or low 3% range.
- Starting in 2022, however, mortgage rates began to rise steadily to end the year around 6.4%.
- In 2023, home loan interest rates have fluctuated a bit but have risen for the past several months in a row.
And that brings us up to the present. But what about the future? What is the forecast for VA mortgage rates in 2024? Here are some recent predictions that offer some insight on the subject.
Forecasts for VA Mortgage Rates in 2024
Economists from Freddie Mac recently stated that they “expect mortgage rates to remain above 6% for the rest of  which will keep sales volume low.”
And that forecast is a fairly safe bet. After all, VA mortgage rates are currently hovering in the 7.5% range on average, and we only have a couple of months left in the calendar year. So it might be even more realistic to say that they will remain above 7% for the rest of this year.
In October 2023, the Mortgage Bankers Association (MBA) predicted that rates would finish the year at around 7.2% and then fall steadily during 2024. According to their forecast, VA mortgage rates could average in the upper 6% range at the start of next year and fall to the low 6% range by the end of 2024.
The California Association of Realtors also expects mortgage rates to decline in 2024. In September, they issued a forecast for the California housing market that also included their outlook for mortgage rates.
According to C.A.R. president Jennifer Branchini:
“2024 will be a better year for the California housing market for both buyers and sellers as mortgage interest rates are expected to decline next year. A more favorable market environment with lower borrowing costs, coupled with an increase in available homes for sale, will motivate buyers and sellers to reenter the market next year.”
If these predictions turn out to be accurate, borrowers could enjoy lower VA mortgage rates in 2024 compared to where we are right now.
But we have to remember these forecasts are the equivalent of an educated guess. No one can predict future economic or interest rate trends with complete accuracy. Still, it’s nice to know that the experts believe lower borrowing costs are on the horizon.
Getting the Lowest Rate Possible
Throughout this article, we have cited average mortgage rates based on Freddie Mac’s weekly survey of the lending industry. These averages help us track borrowing costs and trends over time. But the interest rate you receive on a mortgage will depend on several different factors, including your credit score and the type of loan you choose.
In a separate article, we explained how to get the lowest possible mortgage rate when using a VA home loan. Here are some of the highlights from that article:
1. Try to improve your credit score.
Credit scores are an indicator of risk. Lenders view borrowers with higher credit scores as being a lower risk and offer them better mortgage rates as a result. The best way to improve your credit score is by paying all of your bills on time and in full.
2. Consider using mortgage discount points.
This strategy requires you to pay more money up front, but it also reduces your mortgage rate and the total amount of interest you pay over time. If you stay in the home long enough, discount points could work to your advantage.
3. Consider using an adjustable-rate mortgage loan.
ARM loans tend to have lower initial interest rates when compared to the more popular 30-year fixed-rate mortgage option. Because of this, adjustable mortgages can help borrowers save money during the first few years of home ownership. Just know that your interest rate can change annually once you get past the introductory phase of the first few years.
So there you have it, an update on VA mortgage rates with a forecast for 2024.