By the end of the year, it is predicted that mortgage interest rates will decrease, resulting in significant savings on monthly payments.

The CME FedWatch Tool predicts with near 100% certainty that the Federal Reserve will cut interest rates in September as inflation decelerates.

Homebuyers may benefit from lower monthly mortgage payments due to interest rate cuts.

Mortgage rates are closely tied to 10-year Treasury bonds, but they also follow the Federal Reserve's benchmark interest rate. As a result, a rate cut may lead to lower mortgage rates later this year.

How interest rate cuts could lower monthly mortgage costs

The Mortgage Bankers Association reports that mortgage rates have decreased from 7% to 6.87% in the past week, and most major housing organizations anticipate further drops by the end of the year.

While Realtor.com anticipates an average mortgage rate of 6.5% by the end of 2024, Fannie Mae forecasts a slightly higher rate of 6.7%.

In 2025, there may be more breathing room as major forecasts predict that rates will continue to slide. Wells Fargo forecasts APRs to average 6% in the first three months of 2025, while the MBA expects a rate of 5.9%.

The monthly mortgage costs would fluctuate at varying interest rates, given a U.S. median home price of $420,800 and a 20% down payment.

• 6.87% (current): $2,210
• 6.7%: $2,172
• 6.5%:  $2,128
• 6%: $2,018
• 5.9%: $1,997

Possible savings of over $200 per month for homebuyers could result from declining APRs, according to these totals.

The ability to purchase a home will largely depend on factors such as income, home price, mortgage size, and the availability of a financial cushion to cover expenses like insurance and repairs.

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It is uncertain whether it is better to wait out mortgage rates and purchase a home in 2024 or 2025. Home prices may continue to increase, and there is no assurance that the Federal Reserve will reduce rates in September, as economic conditions can shift rapidly.

According to Kevin McLoughlin, a certified financial planner in Virginia, the phrase "marry the home, date the rate" implies that one should prioritize finding a home they love and commit to it, while treating the mortgage rate as something that can be refinanced at a later time.

If you're considering purchasing a home that's currently unaffordable, but plan to refinance to a lower rate in the future, it's important to be cautious, advises the expert.

See if you can afford a home based on current rates

Determine your monthly mortgage payments using CNBC Make It's mortgage calculator based on the current 30-year interest rate to assess whether you can afford to buy a home.

The calculator does not factor in additional expenses like insurance, property taxes, and private mortgage insurance, which are usually necessary for mortgages with less than a 20% down payment.

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