It all depends on the Fed
During their final meeting of the year earlier in December, central bank policymakers signaled that a nearly two-year battle against inflation is finally coming to an end in a long-awaited policy pivot. In addition to holding rates steady for the third straight month, Fed officials forecast a series of interest rate cuts in 2024 as inflation falls faster than expected.
While the central bank does not set the interest rates that borrowers pay on mortgages directly, its actions influence them. Mortgage rates track the yield on 10-year US Treasuries, which move up or down based on anticipation about the Fed’s actions, the Fed’s policy changes and investors’ reactions to them.
So the recent drops in Mortgage Rates are in anticipation of Fed rate cuts, and while most informed commentators expect Mortgage rates to continue to decline in 2024 and 2025, this expectation is predicated on the Fed following through on its forecast cuts. Any surprises - most obviously a resurgence of inflation, could cause a change(,) of course.