Curve

Will mortgage rates go down in November 2020? Forecast and trends

Tim Lucas
The Mortgage Reports editor

Mortgage rates forecast for November 2020

Mortgage rates have hit new record lows 11 times in 2020.

Eleven times.

It’s strangely reminiscent of 2012 and 2016. Yes, both of those were election years, but that’s not the point here.

Both those years saw swift downward momentum for mortgage rates, followed by rocket-fast rate increases.

Do we expect the same for late 2020 and early 2021? It’s beginning to look more likely.

Better lock while you can.

Find and lock a low rate today. (Oct 28th, 2020)

In this article (Skip to…)


2020 election: Prepare for a wild ride

In 2016, mortgage rates jumped 0.50% in 3 weeks in response to surprise election results.

Markets expected Hillary, they got Trump.

Why the fast interest rate increases? Read on for the full explanation.

Lock in today's rates before they rise. (Oct 28th, 2020)
    Related

Mortgage rates next 90 days

This chart shows past mortgage rate trends, plus predictions for the next 90 days based on current events and 2021 forecasts from major housing authorities.

Mortgage rates next 90 days - predictions, forecast. Mortgage rates may rise after the 2020 presidential election.

Predictions for November 2020

Here are trends we see on the horizon in the upcoming month.

The 2020 presidential election could force mortgage rates upward

The day after the 2016 election, mortgage rates began to rise – fast.

So fast, in fact, that many home buyers and refinance candidates were suddenly priced out of the market.

Rates rose 0.50% in three weeks.

That’s a $100-per-month increase on a $350,000 mortgage.

Rates skyrocketed because markets expected a harsher business environment under Hillary Clinton. Students of the mortgage industry know a faltering economy pulls mortgage interest rates down.

When Trump won, markets had to change gears quickly. Investors decided the next four years would be more friendly toward business. Rates rose on hopes of an improving economy.

We see a similar scenario teed up for November 2020. Biden is the expected winner. But polls could prove ridiculously unreliable, as they did in 2016.

A Trump win could set up a scenario in which mortgage rates jump. We could lose all the mortgage rate improvements seen in 2020 and more.

Don’t want to risk your homeownership or refinancing dreams? Then it’s time to lock.

What would a viable COVID vaccine do to mortgage rates?

There’s another massive risk to mortgage rates. A vaccine for COVID-19.

A safe, effective vaccine would be a huge win for humanity. But mortgage rates would be the biggest loser.

The coronavirus is solely responsible for 2020’s steady interest rate declines. Worldwide economies are struggling with the new socially-distant reality. A vaccine could help things go “back to normal” and markets would rally.

Governments could withdraw stimulus programs and people would go back to work.

This would all be good news, but mortgage rates would rise with an improving economy. Better said, rates would rise even if there were a solid hope for a vaccine.

Unfortunately, the chance of a widely available, safe, and effective vaccine in the next six months is small. These things take time to develop. And, even if it’s available, many people will refuse to get a newly minted vaccine.

Or an even worse scenario: the vaccine proves unsafe for a significant segment of the population.

This would set us back to square one: social distancing, businesses closed, and entire industries on the brink of bankruptcy.

So we think that rates will come crashing back down even if a vaccine is introduced next year.

Lock in today's rates. Start here. (Oct 28th, 2020)

Fed: We’re committed to low rates until 2023

Despite all the risk to rates these days, the Federal Reserve will do what it can to keep rates low.

The group recently reinforced its long-term strategy of suppressing rates for years — until at least 2023.

The rate-friendly stance is a boon for mortgage shoppers.

While the Fed doesn’t affect mortgage rates directly, its sentiment permeates the entire economy and suppresses interest rates.

This “new Fed” has a very different philosophy compared to the Fed of early 2020, despite no change in leadership. The coronavirus pandemic made the group ultra-accommodative to low-rate policies to help boost the blind-sided economy.

The Fed is willing to let its policies drive inflation above 2 percent for extended periods — a break from its staunch 2-percent-max goal. That means it will keep rates low even after its economists see solid signs of inflation.

The group has transformed from an inflation-fearing body to a recession-fearing one.

Federal Reserve fed funds rate predictions through 2023. Pre-COVID and post-COVID projections.

What does this mean for the personal finances of the average American consumer?

It means you’ll likely have access to ultra-low rates for years. There’s not a huge rush to buy or refinance a home before you’re ready.

But if you are ready, it’s a fantastic time to lock in. Like I said up top, mortgage rates have set 11 all-time lows in 2020. It seems the stars are aligned for favorable rates.

Compare top refinance lenders

Refine results by loan type:
Purchase Refinance

Housing agencies nationwide are calling for rates in the high 2s and low 3s for 2021.

Agency 30-Yr Rate Prediction
Fannie Mae 2.80%
Wells Fargo 2.89%
Freddie Mac 3.00%
National Assoc. of Home Builders 3.00%
National Assoc. of Realtors 3.20%
Mortgage Bankers Assoc. 3.30%
Average of all agencies 3.03%
Mortgage rate predictions from major housing authorities 2021. Average of all forecasts is 3.03% 30-year fixed.

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 strategies for November 2020

2.5 million homeowners could save $500+ per month

One astonishing finding from a recent Black Knight report was that nearly 20 million homeowners could cut their mortgage rate by at least 0.75%.

This is the largest number ever.

But the more salient discovery was how much many of those could save.

The study found that 2.5 million of them could save an eye-popping $500 or more per month.

2.5 million homeowners could save $500 per month by refinancing.

The only question is, why aren’t more homeowners breaking down their lender’s door? Better yet: Why didn’t they already refinance last week?

Despite record-low rates and life-changing savings, some are either waiting for even lower rates or just haven’t had the time to apply.

Or, perhaps there’s a credit issue, a lost job, or other barrier to refinancing.

But one thing is certain: homeowners owe it to themselves to check their qualification status, and how much they could save.

They could be in for a very pleasant surprise.

Get started on your loan application here. (Oct 28th, 2020)

Loan product rate updates

Many mortgage shoppers don’t realize there are many different types of rates in today’s mortgage market.

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 have trended lower in 2020.

According to loan software company Ellie Mae, the 30-year mortgage rate averaged 3.02% in September (the most recent data available), down from 3.12% in August.

This is higher than Freddie Mac’s 2.80% weekly average because it factors in low credit and low-down-payment conventional loan closings, which tend to come with higher rates.

Plus, it’s a more delayed report, and interest rates have been dropping.

Lower credit score borrowers can use conventional loans, but these loans are more suited for those with decent credit and at least 3 percent 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 percent down. Since then, home prices have skyrocketed.

Because of your higher home value, you now have 20 percent equity, which means you could refinance into a conventional loan 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 in any mortgage market. This mortgage calculator with PMI estimates your current mortgage insurance cost. Enter a 20 percent down payment to see your new payment without PMI.

Find a low conventional loan rate. Start here. (Oct 28th, 2020)

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 — with an FHA mortgage loan than you would 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 3.01% in September, a bit lower than the average conventional rate.

Another interesting stat from Ellie Mae: About 20 percent of all FHA loans are issued to applicants with credit 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 mortgage application requires no W2s, pay stubs, or tax returns. And you don’t need an appraisal, so home value doesn’t matter.

Find low FHA rates. Start here. (Oct 28th, 2020)

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. Most active-duty members or veterans of the United States military can qualify.

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 credit 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 September, (the most recent data available), 30-year VA mortgage rates averaged just 2.78% while conventional loans averaged 3.02%, 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.

Check today's VA loan rates. Start here. (Oct 28th, 2020)

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.

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.

Like FHA and VA loans, the USDA program is for people who want to buy or refinance a primary residence; these loan programs aren’t for real estate developers.

Find a lock low USDA rates. (Oct 28th, 2020)

Mortgage rates today

While tracking monthly mortgage rate forecasts and weekly averages are helpful, it’s important to know that rates change daily.

You might get 3.00% today, and 3.125% 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.

November economic calendar

The next 30 days hold no shortage of market-moving news. In general, news that points to a strengthening economy could mean higher rates, while bad news from economists can make rates drop.

  • Monday, November 2: ISM Manufacturing
  • Tuesday, November 3: U.S. Presidential Election
  • Friday, November 6: Nonfarm Payrolls, wages, unemployment rate
  • Thursday, November 12: Inflation Rate
  • Tuesday, November 17: Retail Sales
  • Tuesday, November 17: NAHB Housing Market Index
  • Wednesday, November 18: Housing Starts, Building Permits
  • Thursday, November 19: Existing Home Sales
  • Monday, November 30: Pending Home Sales

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

Mortgage rates Q&A

Below are some of the most common questions about mortgage rates.

What are current mortgage rates today?

Mortgage rates fluctuate based on market conditions and your specific situation. For instance, someone with a high credit score will get a lower rate than someone with a low score. 

Will mortgage interest rates go down in 2021?

According to our survey of major housing authorities such as Fannie Mae, Freddie Mac, and the Mortgage Bankers Association, the 30-year fixed rate mortgage will average around 3.03% through 2021. Rates are hovering below this level as of October 2020. 

Can you negotiate a better mortgage rate?

Yes. Lenders have the flexibility to drop their rates and fees. Often, you must approach a lender with a better offer in writing before they will lower their rate.

Is 3.875% a good mortgage rate?

Historically, it’s a fantastic mortgage rate. But, rates are currently hovering lower than this for well-qualified applicants. The average rate since 1971 is more than 8% for a 30-year fixed mortgage. To see if 3.875% is a good rate right now and for you, get 3-4 mortgage quotes and see what other lenders offer. Rates vary greatly based on the market and your profile (credit score, down payment, and more).

Which mortgage company has the best rates?

Most companies have similar rates. However, some offer ultra-low rates to gain market share. Others have lower rates for FHA than conventional, or vice versa. The only way to know if your company is offering the lowest rate is to get quotes from various lenders. 

How much does 1 point lower your interest rate?

A point is a fee equal to 1 percent of your loan amount, or $1,000 for every $100,000 borrowed. Your interest rate could drop a quarter to a half a percentage point or more for each point paid. However, that can vary depending on the lender, loan characteristics, and borrower profile.

How can I avoid paying closing costs?

You can 1) request a lender credit; 2) request a seller credit (if buying a home); 3) increase your mortgage rate to avoid points; 4) get a down payment gift (which can be used for closing costs); 5) get down payment assistance. 

What do 10-year Treasury bond yields have to do with mortgage interest rates?

Treasury yields and mortgage rates are not directly linked, but they are strongly correlated. 10-year Treasury yields and 30-year fixed mortgage interest rates tend to move in lock step with one another. That’s because both products are bought on the secondary market by the same types of investors.

Mortgage rates are higher than Treasury yields because mortgages are inherently more risky. Interest rates for mortgages are based on prices for mortgage-backed securities (MBS). The same factors that drive MBS up or down usually drive Treasuries up or down, hence the common misconception that Treasuries drive mortgage rates.

Why do interest rates decrease during times of economic volatility?

The Fed doesn’t set mortgage rates, but its economic policies influence mortgage markets. In times of economic uncertainty, the Fed promotes lower interest rates to encourage more borrowing which helps stimulate the economy. Lower rates can also raise home values which bolsters many Americans’ net worth.

Can I refinance even if my home is in forbearance?

If you entered into mortgage forbearance because of the coronavirus pandemic, you may be able to qualify for a refinance after exiting your forbearance plan. If you missed payments during forbearance, you’ll have to make three consecutive on-time payments before qualifying for a conventional refinance, according to FHFA’s rules.

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 (Oct 28th, 2020)  

Selected sources:

  • https://www.elliemae.com/mortgage-data/origination-insight-reports
  • https://tradingeconomics.com/united-states/calendar
  • https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
  • https://www.blackknightinc.com/blog-posts/cnbc-on-black-knight-data-record-19-3m-refinance-candidates/