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October 2019 mortgage rates forecast (FHA, VA, USDA, Conventional)

Tim Lucas
The Mortgage Reports editor

Mortgage rates forecast for October 2019

Mortgage rates seemed to be on a never-ending path downward, that is, until September.

After hitting a 3-year low of 3.49%, the 30-year fixed average jumped to 3.73% on September 19 according to Freddie Mac.

If nothing else, the jump was a reminder to consumers that time is short. Rates could jump at any moment no matter how many forces seem to be pushing them down.

October brings a time of uncertainty for mortgage rates. The Fed, trade wars, and recession risk could swing rates in unexpected directions.

Want to capture a historic rate before it’s gone? You might want to lock in.

Shop and Compare Today's Rates and Save (Sep 22nd, 2019)

Predictions for October

October will be a wild ride for mortgage rates. Market-moving news will leave rates different than they were in September. The only question is, will they be more or less advantageous for mortgage shoppers?

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Forecasts for 2019 put rates somewhere around 3.85% by the end of the year. That’s down from forecasts earlier in the year that called for rates in the 5s.

Rates have been steadily dropping since late-2018, with only a slight reversal of fortunes in September. Rates are still running well below the 4% mark according to Freddie Mac.

Been looking for a good rate on a refinance or home purchase? Now might be the time to lock.

Yield curve inversion should help keep rates down in October

Mortgage rates were already headed “south” when the unthinkable happened: The 2-year/10-year yield curve inverted.

But don’t tune out just yet because that sounds too technical. The phenomenon has predicted the last seven recessions perfectly. And with recessions come lower rates. Let’s explain briefly.

Ten-year U.S. Treasury bonds usually carry a higher interest rate than 2-year ones. The government pays a higher interest rate or “yield” for long-term bonds.

But on August 14, 2019, the 2-year yield was higher than the 10-year. That indicates that investors believe an oncoming recession will bring government stimulus. That predicted stimulus brings down the 10-year yield.

As mentioned, the last seven U.S. recessions were preceded by a yield curve inversion. At least during the last 3 recessions, mortgage rates fell substantially during and afterward.

Yield Curve Inversions Through Mortgage Rate History

For October, just the fear of recession should keep upward rate movement subdued. If you’re looking to buy or refinance, yes, rates may rise, but few are predicting rates much above 4% any time soon.

Compare Rates From Top Rated National Lenders and Save (Sep 22nd, 2019)

Federal Reserve meets again in October but the outcome is unclear

The Federal reserve uses “levers” to adjust economic performance in the U.S. One of those levers is the federal funds rate.

It’s the rate at which banks can lend each other money, but it affects home equity lines, credit card rates, and even mortgage rates, although indirectly.

On September 18, the Fed cut rates for just the second time since December 2008. (The other one was during the previous meeting on July 31.) Lackluster economic data has combined with pressure from President Trump to cut rates.

Yet the Fed is divided on whether to issue another rate cut in 2019. The post-meeting announcement indicated that just 7 of 10 voting members approved the 0.25% rate cut. Two wanted rates to stay put, and one voting member wanted an even deeper cut of 0.50%

Additionally, most Fed members see the federal funds rate staying put for the rest of 2019, or even rising.

So what does all that mean for mortgage rates in October?

Markets are busy digesting information from the September Fed meeting. Another meeting happens on October 29-30, but according to CME Group’s FedWatch tool, there’s just a 42% chance of another cut, at the time of this writing.

We could see rates whipsaw as the meeting gets closer and markets predict the next move.

Federal Funds Rate Adjustment Forecast Through 2022


Will mortgage rates stay low?

It’s getting harder and harder to tell.

Rates fell throughout 2019 until mid-September. Suddenly, mortgage rates spiked, perhaps as a correction to an 8-month mortgage rate bull market.

But the fact remains that all the factors that led to low rates in the first place are still present.

Rate-suppressing factors include:

Trade wars: While tensions have eased since September, there seems to be no clear solution to the U.S.-China trade war in sight. The two economic giants will continue to duel and any negative development could push rates lower.

Economic uncertainty: Many indicators are pointing toward a healthy economy, but others are pointing toward recession. How long can this mega-bull-run for markets last? There’s a persistent feeling that recession is just around the corner, and even the possibility is helping keep rates low.

Yield curve inversion: The 2-year/10-year yield curve inverted in mid-August. That phenomenon has accurately predicted the last seven recessions. Even if a recession doesn’t follow, markets are worried. Investors will strongly consider exiting the stock market and buying safer assets such as mortgage-backed securities (MBS). The more demand there is for MBS, the lower rates go.

If you’ve been thinking about a home purchase, refinance, or home equity line of credit, this month is looking to be a great one to take action.

Shop and Compare Today's Rates and Save (Sep 22nd, 2019)

Housing agencies nationwide are calling for rates in the high 3s or low 4s for the remainder of 2019.

Agency 30-Yr Rate Prediction
National Association of Realtors 3.50%
National Association of Home Builders 4.20%
Mortgage Bankers Association 3.70%
Freddie Mac 3.70%
Fannie Mae 3.50%
Realtor.com 4.50%
Average of all agencies 3.85%

To sum it up, rate predictions vary widely. Today’s rate might be as good as we’ll see for years to come, or they might improve.

Mortgage Rate Forecasts From Housing Authorities 2019

Advice for October 2019

Knowing what will happen in October is only half the battle. As a mortgage rate shopper, you need to know the best actions to take this month.

Buy before home prices rise

All this talk of low rates has not gone unnoticed by new home buyers.

In 2018, buyers were sitting the fence. Now they are jumping off it in droves, running toward any available housing.

According to the National Association of Realtors (NAR), sales of existing homes were up 2.5% in July and another 1.3% in August.

NAR chief economist Lawrence Yun said, “As expected, buyers are finding it hard to resist the current rates. The desire to take advantage of these promising conditions is leading more buyers to the market.”

“Buyers are finding it hard to resist the current rates.” –Lawrence Yun, NAR Chief Economist

Rates are low. That makes previously unaffordable homes affordable, to the tune of $200 per month on a $350,000 mortgage, for every 1% rate drop.

But there’s a darker side to lower rates: rising home prices.

In the remainder of 2019 and into 2020, home prices are bound to rise and bidding wars to become more commonplace.

Fannie Mae released its Home Purchase Sentiment Index (HPSI), which indicated that 41% of consumers believe home prices will rise in the next 12 months, a 5-point bump from the previous month.

Renters should seriously consider capitalizing on today’s combination of ultra-low rates and still-reasonable home prices. A year from now, they might be glad they did.

Shop and Compare Today's Rates and Save (Sep 22nd, 2019)

Refinance or potentially wait in a very, very long line

There is a massive glut of refinances pouring into lenders’ doors at the moment.

The typical consumer might not think that it’s a big deal. But closing a loan is still a surprisingly manual process even in 2019. It requires a lot of man-hours.

Which wouldn’t be so bad. Except that lenders are seriously understaffed after 2018’s escalating rates. Lenders were forced to implement massive layoffs as refinance volumes plummeted.

Now, lenders are caught off guard as rates dropped to 2% below what was expected this year. The Mortgage Reports asked experts late last year their predictions, and most said that rates would settle around 5.5% by late-2019. Rates are around 3.7% per Freddie Mac, at the time of this writing.

Lenders are running on skeleton crews, and they simply can’t handle the volume coming in. According to the NAR, refinance applications jumped 37% in a single week in August.

The bottom line: Refinance candidates will be waiting in a very, very long line if they don’t apply now.

And that comes with greater expense. Applicants will need to obtain longer locks to close on time. For each 15 days extra it takes to close your loan, tack on another 0.125%-0.25% of the loan amount in fees.

Loan product rate updates

Many mortgage shoppers don’t realize there are many different types of rates. But this knowledge can help home buyers and refinancing households find the best value for their situation.

Following are updates for specific loan types and their corresponding rates.

Conventional loan rates

Conventional refinance rates and those for home purchases are still low despite recent increases.

According to loan software company Ellie Mae, the 30-year mortgage rate averaged 4.11% in August (the most recent data available).

This is higher than Freddie Mac’s 3.73% average because it factors in low credit and low-down-payment conventional loan closings, which tend to come with higher rates. Additionally, the most recent Ellie Mae report shows rate levels before they started dropping significantly.

Lower credit score borrowers can use conventional loans, but these loans are more suited for those with decent credit and at least 3% down. Five percent down is preferable due to higher rates that come with lower down payments.

Twenty percent of equity is preferred when refinancing.

With adequate equity in the home, a conventional refinance can pay off any loan type. Got an Alt-A, subprime, or high-PMI loan? A conventional refi can take care of it.

For instance, say you purchased a home three years ago with an FHA loan at 3.5% down. Since then, home values have skyrocketed.

You refinance into a conventional loan (because you now have 20% equity) and eliminate FHA mortgage insurance.

This could be a savings of hundreds of dollars per month, even if your interest rate goes up.

Getting rid of mortgage insurance is a big deal. This mortgage calculator with PMI estimates your current mortgage insurance cost. Enter 20% down to see your new payment without PMI.

Shop and Compare Today's Rates and Save (Sep 22nd, 2019)

FHA mortgage rates

FHA is currently the go-to program for home buyers who may not qualify for conventional loans.

The good news is that you will get a similar rate — or even lower one — with an FHA loan than you will with conventional.

Related: Read more about FHA costs and requirements on our FHA loan calculator page.

According to loan software company Ellie Mae, which processes more than 3 million loans per year, FHA loan rates averaged 4.11% in August (the most recent data available), matching the average conventional rate.

Another interesting stat from Ellie Mae: About 30% of all FHA loans are issued to applicants with scores below 650.

FHA loans come with mortgage insurance. But the overall cost is not much more than for conventional loans.

A little-known program, called the FHA streamline refinance, lets you convert your current FHA loan into a new one at a lower rate if rates are now lower.

An FHA streamline requires no W2s, pay stubs, or tax returns. And you don’t need an appraisal, so home value doesn’t matter.

Learn more about the FHA streamline refinance here.

Shop and Compare Today's Rates and Save (Sep 22nd, 2019)

VA mortgage rates

Homeowners with a VA loan currently are eligible for the ever-popular VA streamline refinance.

No income, asset, or appraisal documentation is required.

If you’ve experienced a loss of income or diminished savings, a VA streamline can get you into a lower rate and better financial situation. This is true even when you wouldn’t qualify for a standard refinance.

But don’t overlook the VA loan for home buying. It requires zero down payment. That means if you have the cash for closing costs, or can get them paid for by the seller, you can buy a home without raising any additional funds.

Don’t overlook the VA loan for home buying. It requires zero down payment.

VA mortgages are offered by local and national lenders, not by the government directly.

This public-private partnership offers consumers the best of both worlds: strong government backing and the convenience and speed of a private company.

Most lenders will accept scores down to 620, or even lower. Plus, you don’t pay high interest rates for low scores.

Quite the contrary, VA loans come with the lowest rates of all loan types according to Ellie Mae. In August (the most recent data available), 30-year VA mortgage rates averaged just 3.82% while conventional loans averaged 4.11%, representing a big discount if you’re a veteran.

Check your monthly payment with this VA loan calculator.

There’s incredible value in VA loans.

Show Me Today's Rates (Sep 22nd, 2019)

USDA mortgage rates

Like FHA and VA, current USDA loan holders can refinance via a “streamlined” process.

With the USDA streamline refinance, you don’t need a new appraisal. You don’t even have to qualify using your current income. The lender will only make sure that you are still within USDA income limits.

More about the USDA streamline refinance.

Home buyers are also learning the benefits of the USDA loan program for home buying.

No down payment is required, and rates are ultra-low.

Home payments can be even lower than rent payments, as this USDA loan calculator shows.

Qualification is easier because the government wants to spur homeownership in rural areas. Home buyers might qualify even if they’ve been turned down for another loan type in the past.

Compare Rates From Top Rated National Lenders and Save (Sep 22nd, 2019)

Mortgage rates today

While a monthly mortgage rate forecast is helpful, it’s important to know that rates change daily.

You might get 3.9% today, and 4.0% tomorrow. Many factors alter the direction of current mortgage rates.

To get a synopsis of what’s happening today, visit our daily rate update. You will find live rates and lock recommendations.

This month’s economic calendar

The next thirty days hold no shortage of market-moving news. In general, news that points to a strengthening economy could mean higher rates, while bad news can make rates drop.

  • Tuesday, October 1: ISM Manufacturing
  • Friday, October 4: Nonfarm Payrolls, wages, unemployment rate
  • Thursday, October 10: Consumer Price Index
  • Wednesday, October 16: Retail Sales
  • Tuesday, October 22: Existing Home Sales
  • Tuesday, October 29: Fed meeting begins
  • Wednesday, October 30: Fed meeting adjourns, rate announcement

Now could be the time to lock in a rate in case these events push up rates this month.

What are today’s mortgage rates?

Low mortgage rates are still available. You can get a rate quote within minutes with just a few simple steps to start.

Show Me Today's Rates (Sep 22nd, 2019)  

Selected sources:

  • https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
  • https://www.elliemae.com/mortgage-data/origination-insight-reports
  • https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm