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

Tim Lucas
The Mortgage Reports editor

Mortgage rates forecast for February 2019

Mortgage rates are on uncertain ground.

The government shutdown could have lasting effects on the U.S. economy, and therefore mortgage rates.

Continued China-U.S. tensions are making rates even more unpredictable.

On one hand, rates could zoom lower if the economy takes a turn for the worse. Eight hundred thousand furloughed workers can deteriorate the current economic expansion.

But, interest rates are subject to increases if as the government resumes operations and the economy appears unharmed.

The only way to ensure a low rate is to lock in now.

» MORE: Show Me Today's Rates (February 19, 2019)

Predictions for February

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

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Rate forecasts for 2018 pretty much came true. Most major housing and financial authorities predicted rates somewhere between 4.7% and 5.0%.

That’s right about where everything ended up.

Rising rates aren’t expected to take a breather in 2019, though. The same housing agencies that were “spot on” with their forecasts in 2018 are predicting rates in the low- to mid-5s in the new year.

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

Start the home buying or refinance lock-in process here. (Feb 19th, 2019)

Mortgage Rates Forecast Predictions February 2019


The stock market could falter, helping rates

Late -2018 was ugly for stocks.

The Nasdaq officially entered a bear market, defined as a 20% drop from recent highs. The Dow Jones Industrial Average and S&P 500 indices weren’t far behind.

The market has since recovered, but is nowhere near stable ground, thanks to strained China-U.S. relations, and, oh yeah, nearly one million furloughed government workers.

What’s a shaky market got to do with mortgage rates? A lot.

High-risk markets get investors moving towards safer assets, such as mortgage-backed securities (MBS), upon which mortgage rates are based.

The more money piles into MBS, the lower rates go.

Why are MBS popular in an uncertain world? If you can make 10 percent per year in the stock market, you move all your money there. If you’ll lose 10 percent per year, you move your money to low-risk assets, even if they provide lower returns.

If you’ll lose 10 percent per year in the stock market, you move your money to low-risk assets, even if they provide lower returns.

MBS are viewed as a low-risk investment.

Bottom line: Expect rates to fall in the event of a February stock rout.

Lock in your rate here. (Feb 19th, 2019)

Government shutdown could have lasting effect on mortgage rates

At the time of this writing, the government has been shut down for 32 days.

32 days.

It’s the longest shutdown in U.S. history by far. It beats President Bill Clinton’s 21-day closure from December 1995 to January 1996 over a dispute with the GOP Congress.

Whether or not the “closed for business” sign still hangs on the White House door in February, the economy will still feel the effects that month and beyond.

As mentioned earlier, a shaky economy leads to lower mortgage rates. In this way, the shutdown might benefit mortgage shoppers, even as it casts a pall over the broader economy. There are two ways the shutdown will affect interest rates.

1. The economy could falter because of the shutdown

First, and the most obvious, is that 800,000 government workers are not receiving paychecks. They spend and invest less. This eats away at the U.S. economy more than you might think.

The New York Times reports an estimated reduction in quarterly growth of 0.13% for each week the government is shut down. This is according to the Trump Administration itself.

The New York Times reports an estimated reduction in quarterly growth of 0.13% for each week the government is shut down.

That means the economy has lost nearly 0.6% in growth at the time of this writing. That’s significant, considering that the first quarter of 2018 saw only a 2.2% economic increase. That means the shutdown has eaten away about 25% of the quarter’s growth so far, and that number rises with each additional day.

Even if the shutdown ends immediately, the economy is still on shaky ground. Ironically, this may benefit mortgage consumers. Investors must deal with less growth and an unpredictable government. This may lead them to buy into safer assets like the bonds that determine mortgage rates.

Rates fall when these types of bonds are in demand.

2. Expect volatility in February thanks to the shutdown

As mentioned, this is the longest shutdown in U.S. history at 32 days.

We are in uncharted waters as to the lasting effects. Will a 40- or 50-day shutdown do long-term damage to the economy? No one knows.

Adding to uncertainty, government economic reports are on hold while government workers are furloughed. Investors rely on these reports to decide where to place investments.

In February, we could see surprising volatility as investors digest monthly reports that haven’t been released in 60 days.

It’s hard enough to interpret data from these reports. To complicate matters, investors will need to decide whether changes are shutdown-induced or the start of a trend.

You’ll see lots of gyrations in mortgage rates as investors sort out the data. Be ready to lock if mortgage rates fall in your favor. Good rates often last hours, not days.


The Fed calls for slower rate hikes in 2019

The Federal Reserve is not as confident in the future as it used to be.

In December, it raised rates, but backed off its forecast to hike rates three additional times in 2019. Now, it projects just two increases.

The Fed adjourns another session on January 30, just in time to sway markets in February.

Don’t expect the group to raise its benchmark rate, but it may address the shutdown and other economic headwinds in its post-meeting announcement.

More talk of slowing U.S. growth could push mortgage rates to multi-month lows.


Fed Meeting December 2018 plus Forecasts


Will rates continue to drop?

It’s a possibility. However, according to Freddie Mac, rates are already at 9-month lows as of the time of this writing. Lower rates are becoming less likely.

There’s a greater chance that rates will rise again soon. In the chart below, major housing authorities predict higher rates. If these agencies are correct, rates will start a march upward in coming months.

Verify your new rate (Feb 19th, 2019)

Mortgage rate trends as predicted by housing authorities

Housing agencies nationwide are calling for rates in the low- to mid-5s for 2019. Only one agency is predicting a mild increase of 4.8 percent.

Agency 30-Yr Rate 2019 Prediction
National Association of Realtors 5.3%
National Association of Home Builders 5.2%
Mortgage Bankers Association 5.1%
Freddie Mac 5.1%
Fannie Mae 4.8%
Realtor.com 5.5%
Average of all agencies 5.17%

To sum it up, everyone is predicting higher rates. Today’s rate might be as good as we’ll see for years to come.


Mortgage Rate Predictions 2019 from Leading Housing Authorities


Verify your new rate (Feb 19th, 2019)

Advice for February 2019

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

Get up to 4 mortgage quotes here. (Feb 19th, 2019)

Homeowners might finally be eligible for a refinance

Refinance shoppers warmed the bench in 2018.

Rates were too high for most homeowners to benefit. Unless they needed a huge amount of cash via a cash-out refinance, they didn’t touch their 4% mortgage.

But a window of opportunity is opening again.

As of the time of this writing, mortgage rates were as low as in April 2018 according to housing agency Freddie Mac. Thirty-year mortgage rates averaged just 4.45 percent for the week of January 17.

Mortgage rates are down nearly 50 basis points (0.50%) since their November highs.

That’s a savings of $90 per month on a $300,000 loan.

If rates keep dropping, refinance shoppers may be enticed to pull the trigger. That’s especially true for those getting into a 15-year loan or turning their home equity into cash via a cash-out refinance. Still others may refinance to cancel their PMI or because their credit has improved.

How low do rates have to go before you consider a refinance? It depends on your current rate, of course. But, if you can save $100 per month or more, it’s worth looking into.

Ready to get started on your refi? Click here. (Feb 19th, 2019)

Mortgage lenders are more likely to approve your loan

Because rates rose in 2018, lenders are desperate.

Mortgage refinance applications are down more than 30% compared to one year ago, according to the Mortgage Bankers Association.

For this reason, home purchase and refinance applicants should try and try again if they get denied. Remember: shopping for a mortgage is like shopping for anything else. There are hundreds of sources from which you can buy. If you are denied, try again.

Mortgage companies are likely to stir up business by loosening guidelines in 2019. Higher debt-to-income ratios and lower credit scores may be allowed.

Frustrated mortgage applicants could finally get a “yes.”

Loan product rate updates

Many mortgage shoppers don’t realize there are many different types of mortgage 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 5.19% in December.

This is higher than Freddie Mac’s 4.55% 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.

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.

Verify your conventional loan eligibility (Feb 19th, 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 5.20% in December, while conventional loans averaged 5.19%.

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.

Verify your FHA loan eligibility (Feb 19th, 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 December, 30-year VA mortgage rates averaged just 5.01% while conventional loans averaged 5.19%

Check your monthly payment with this VA loan calculator.

There’s incredible value in VA loans.

Verify your VA loan eligibility (Feb 19th, 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.

Verify your USDA loan eligibility (Feb 19th, 2019)

Mortgage rates today

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

You might get 4.8% today, and 4.9% 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.

  • Wednesday, January 30: FOMC Meeting adjourns, press conference
  • Friday, February 2: Nonfarm Payrolls, wages, unemployment rate
  • Wednesday, February 14: Consumer Price Index (a key inflation gauge)
  • Wednesday, February 14: Retail Sales
  • Friday, February 16: Housing Starts
  • Wednesday, February 21: Existing Home Sales
  • Wednesday, February 21: FOMC Minutes
  • Tuesday, February 27: Fed President Jerome Powell speaks
  • Wednesday, February 28: GDP

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 (February 19, 2019)

 

Selected sources:

  • https://www.cnn.com/2019/01/03/politics/government-shutdown-length-trnd/index.html
  • https://www.elliemae.com/mortgage-data/origination-insight-reports
  • https://www.nytimes.com/2019/01/15/us/politics/government-shutdown-economy.html