Mortgage rates forecast for September 2019
Mortgage rates are down more than 1% since late last year, and there could be more gas in the tank to drive them lower.
Trade wars, Fed cuts, and the recent yield curve inversion could make September the optimal month to lock.
If you were looking for a $300,000 mortgage in late-2018, you’d pay $240 more per month than you would now, based on Freddie Mac data.
That monthly difference could make a refinance or a home purchase finally pencil out. But rates may not stay this low for long.
Ready to capture historic rates while they’re still available? You might want to consider starting now.Compare Rates From Top Rated National Lenders and Save (Aug 25th, 2019)
Predictions for September
September will be a wild ride for mortgage rates. Market-moving news will leave rates different than they were in August. The only question is, will they be more or less advantageous for mortgage shoppers?
- Mortgage rate predictions
- Federal Reserve moves
- Featured lenders this month
- Will rates keep dropping?
- Mortgage rate trends
- Advice for September
- Conventional, FHA, VA, and USDA rates
- Economic calendar
Forecasts for 2019 put rates somewhere around 4.4% by the end of the year. That’s down from forecasts earlier in the year that called for rates in the 5s.
The funny thing is, though, that rates have been dropping since late 2018. Now, it appears rate increases could be much more subdued than first thought, if rates increase at all.
Been looking for a good rate on a refinance or home purchase? Now might be the time to lock.
Yield curve inversion could spell rock-bottom rates in September
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.
If nothing else, the inversion should give the Federal Reserve additional ammo with which to justify another rate cut at its September meeting.
All in all, September should be another fantastic month for mortgage rates.Compare Rates From Top Rated National Lenders and Save (Aug 25th, 2019)
September: Only the second Fed rate cut since December 2008
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 is expected to cut rates for just the second time since December 2008. (The other one was during the last meeting on July 31.) Lackluster economic data has combined with pressure from President Trump to cut rates.
Now, the Fed will do something thought impossible earlier this year: cut rates for a second time, when they were expected to raise rates not that long ago.
The recent yield curve inversion all but guaranteed another rate cut. In fact, the CME Gropu FedWatch Tool says there’s a 100% chance of at least a 0.25% cut at the September meeting.
The move could have profound effects for mortgage shoppers. It might usher in a new era for mortgage rate shoppers.
Talk about paradigm shifts.
Just months ago, everyone was predicting rates in the 5s. That would have been a tough pill to swallow for refinance and home purchase candidates alike.
Just months ago, everyone was predicting rates in the 5s.
With rates in the 3s, and the possibility of even lower rates, a whole new world is opened up to those seeking home financing.
But should mortgage consumers wait until then to lock in a rate? No. Markets are forward-looking, so many believe that mortgage rates have already fallen to fresh lows in anticipation of the new Fed paradigm.
Will mortgage rates continue to drop?
Many analysts think so.
Many factors are leading to a low rate environment. If we don’t see lower rate in September, we’ll likely see rates about as low as in August.
Rate-suppressing factors include:
Trade wars: President Trump is proposing new tariffs on $300 billion worth of Chinese goods starting September 1. The world’s two largest economies in a game of economic chicken has markets worried, to say the least. Trade wars often lead to slower economies on both sides. One of this scale could feasibly cause a worldwide economic regression. As students of mortgage rates know, slow economic times typically means lower rates.
Fed rate cuts: The Federal Reserve is all but guaranteed to cut the federal funds rate on September 18. While the Fed doesn’t control mortgage rates directly, its actions and statements influence rates of all kinds, including mortgage rates.
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, September is looking to be a great month to take action.Compare Rates From Top Rated National Lenders and Save (Aug 25th, 2019)
Mortgage rate trends as predicted by housing authorities
Housing agencies nationwide are calling for rates in the low- to mid-4s for 2019.
|Agency||30-Yr Rate Prediction|
|National Association of Realtors||4.40%|
|National Association of Home Builders||4.46%|
|Mortgage Bankers Association||4.40%|
|Average of all agencies||4.38%|
To sum it up, everyone is predicting slightly higher rates. Today’s rate might be as good as we’ll see for years to come.
Advice for September 2019
Knowing what will happen in September is only half the battle. As a mortgage rate shopper, you need to know the best actions to take this month.
10 million homeowners could be saving $267 per month: report
There’s some very exciting news from mortgage data firm Black Knight.
Their research shows that nearly 10 million homeowners could cut their current mortgage payment by an average of $267 per month.
But, frankly, that’s an underestimate. This assumes a 720 credit score and 20% equity in the home. But with refinance programs like FMERR and the FHA streamline refinance, many other could qualify. The report says there’s an additional 10 million who could benefit from a refinance, bringing the total to 20 million homeowners.
Most refinance candidates sat on the sidelines in 2018 because rates were just too high. Now, many people — even those who purchased their homes in 2018 — are eligible for a refinance and big monthly savings.
Rates are hitting fresh lows, and now could be the time to lock.Compare Rates From Top Rated National Lenders and Save (Aug 25th, 2019)
Buy before home prices rise
All this talk of free-falling 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.
Rates are low. That makes previously unaffordables homes affordable, to the tune of $200 per month on a $350,000 mortgage, for every 1% rate drop.
In 2018, buyers were sitting the fence. Now they are jumping off it in droves.
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 latest 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.
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 2% lower than expected so far this year. The Mortgage Reports asked experts late last year their predictions, and most said around 5.5% by late-2019. Rates are at 3.6% 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 4.41% in June (the most recent data available).
This is higher than Freddie Mac’s 3.6% 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.Show Me Today's Rates (Aug 25th, 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 4.49% in June (the most recent data available), while conventional loans averaged 4.41%.
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.Show Me Today's Rates (Aug 25th, 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 June (the most recent data available), 30-year VA mortgage rates averaged just 4.20% while conventional loans averaged 4.41%, 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.Compare Rates From Top Rated National Lenders and Save (Aug 25th, 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.
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 (Aug 25th, 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.
- Friday, September 6: Nonfarm Payrolls, wages, unemployment rate
- Thursday, September 12: European Central Bank (ECB) announcement
- Thursday, September 12: Consumer Price Index
- Friday, September 13: Retail Sales
- Tuesday, September 17: Fed meeting begins
- Wednesday, September 18: Fed meeting adjourns, rate announcement
- Thursday, September 19: Existing Home Sales
- Tuesday, September 24: Consumer Confidence
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 (Aug 25th, 2019)