Will Rates Go Down in October 2023? | Rates Forecast

Mortgage rate forecast for next week (Oct. 2-6)

Interest rates jumped for the third straight week, reaching the highest point since 2000.

The average 30-year fixed rate mortgage (FRM) increased from 7.19% on Sept. 21 to 7.31% on Sept 28, according to Freddie Mac.

“Mortgage rates now at their highest level in more than two decades continued to climb this week as investors adjusted their expectations about the strength and resilience of the US economy,” said Orphe Divounguy, senior macroeconomist at Zillow Home Loans. However, the impacts of tighter credit conditions, rising oil prices, student loan repayments and the risk of a prolonged government shutdown are all expected to cool the labor market further and temper economic activity in the coming months.”

In this article (Skip to...)

• Will rates go down in October?
• 90-day forecast
• Expert rate predictions
• Mortgage rate trends
• Rates by loan type
• Mortgage strategies for October
• Mortgage rates FAQ

Will mortgage rates go down in October?

Mortgage rates fluctuated significantly to open 2023 and mostly trended upward to start the second half. The average 30-year fixed rate went as low as 6.09% on Feb. 2 and climbed up to 7.31% on Sept. 28, according to Freddie Mac.

The range can be largely attributed to the Federal Reserve’s ongoing fight against inflation, juxtaposed with uncertainty in the banking sector sparked by Silicon Valley Bank’s collapse. However, with duress permeating the financial market and the fallout from U.S. debt ceiling talks, the Fed may continue making hikes to bring interest rates down.

With the economy likely heading into a recession, it’s possible we’ve already seen the peak of this rate cycle. Of course, interest rates are notoriously volatile and could tick back up on any given week.

Experts from First American, CJ Patrick Company, Beeline, and others weigh in on whether 30-year mortgage rates will climb, fall, or level off in October.

Expert mortgage rate predictions for October

Ralph DiBugnara, president at Home Qualified

Prediction: Rates will moderate

“The market has truly been uncertain on where the economy and or interest rates are headed. Although, as inflation has trended down it still has not gotten down to levels the Fed has been targeting. I do not believe we will see a fed rate raise, if there is any at all this year, until November. The Fed has discussed one more raise and that seems to be the most likely target month. For October I see rates on a 30-year fixed holding around 7.375% and the 15-year fixed at 6.875%.

Danielle Hale, chief economist at Realtor.com

Prediction: Rates will drop

“The economy is nearing an inflection point. As a result, mortgage rate volatility may continue until it is clear that the economic landing has actually occurred and we are not seeing a touch-and-go on growth that could reignite inflation.

Eventually, as it becomes clear that the economy is on a stable path and inflation has retrenched, we expect to see mortgage rates trend lower. This could already be underway and may continue into October, but we may also get a surprise data reading that delays the eventual settling back of rates overall and mortgage rates specifically.”

Jess Kennedy, co-founder and COO at Beeline

Prediction: Rates will moderate

“With an anticipated Fed pause, the sentiment is that rates will remain flat or slightly decrease. That pause in rate hikes operates as a big signal to the market that will start to push rates lower. We don’t expect big changes but this may be the start of a downward trend.”

Odeta Kushi, deputy chief economist at First American

Prediction: Rates will moderate

“While the labor market is noticeably cooling and inflation continues to decelerate, the Federal Reserve will likely maintain a restrictive stance of monetary policy until inflation returns to its 2% target on a sustained basis. As a result, mortgage rates are unlikely to meaningfully decline in the near term. However, if inflation continues to trend in the right direction and the Federal Reserve decides to pause interest rate hikes, prospective buyers could get some reprieve from rising mortgage rates.”

Rick Sharga, president and CEO at CJ Patrick Company

Prediction: Rates will moderate

“Mortgage rates have been stubbornly high over the past month, driven in part by increased yields in the bonds market. Both mortgage rates and yields on U.S. Treasury notes seem to be rising due to rhetoric from the Federal Reserve, which has signaled that it may need to raise Fed Funds rates higher - and keep them higher longer - than what the market had been anticipating.

It’s still likely that mortgage interest will start to come down later this year - albeit slowly and gradually - once the Fed signals that it’s done with the current cycle of rates hikes. But for October, we’re more likely to see rates remain in the 7.0-7.5% range.”

Mortgage interest rates forecast next 90 days

As inflation ran rampant in 2022, the Federal Reserve took action to bring it down and that led to big interest rate growth. The average 30-year fixed-rate mortgage more than doubled within the course of the year.

With inflation gradually cooling, the size of the Fed’s rate hikes are coming down. Additionally, the likelihood of a recession has many experts believing mortgage interest rates will move within a tighter range compared to the spikes we saw in early 2022.

Of course, rates could rise on any given week or if another global event causes widespread uncertainty in the economy.

Mortgage rate predictions for 2023

The 30-year fixed-rate mortgage averaged 7.31% as of Sept. 28, according to Freddie Mac. All five major housing authorities we looked at projected 2023’s third quarter average to finish below that.

National Association of Realtors sits the low end of the group, predicting the average 30-year fixed interest rate to settle at 6.5% for Q3. Meanwhile, Wells Fargo had the highest forecast of 7.05%.

Current mortgage interest rate trends

Mortgage rates increased for the third consecutive week.

The average 30-year fixed rate rose from 7.19% on Sept 21 to 7.31% on Sept. 28. The average 15-year fixed mortgage rate similarly grew, going from 6.54% to 6.72%.

Source: Freddie Mac

After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 14-year high in 2022. Many experts and industry authorities believe they will follow a downward trajectory in 2023. Whatever happens, interest rates are still below historical averages.

Dating back to April 1971, the fixed 30-year interest rate averaged around 7.8%, according to Freddie Mac. So if you haven’t locked a rate yet, don’t lose too much sleep over it. You can still get a good deal, historically speaking — especially if you’re a borrower with strong credit.

Just make sure you shop around to find the best lender and lowest rate for your unique situation.

Mortgage rate trends by loan type

Many mortgage shoppers don’t realize there are 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 3-month mortgage rate trends for the most popular types of home loans: conventional, FHA, VA, and jumbo.

Source: Black Knight Originations Market Monitor Report

Which mortgage loan is best?

The best mortgage for you depends on your financial situation and your goals.

For instance, if you want to buy a high-priced home and you have great credit, a jumbo loan is your best bet. Jumbo mortgages allow loan amounts above conforming loan limits, which max out at $ in most parts of the U.S.

On the other hand, if you’re a veteran or service member, a VA loan is almost always the right choice. VA loans are backed by the U.S. Department of Veterans Affairs. They provide ultra-low rates and never charge private mortgage insurance (PMI). But you need an eligible service history to qualify.

Conforming loans and FHA loans (those backed by the Federal Housing Administration) are great low-down-payment options.

Conforming loans allow as little as 3% down with FICO scores starting at 620. FHA loans are even more lenient about credit; home buyers can often qualify with a score of 580 or higher, and a less-than-perfect credit history might not disqualify you.

Finally, consider a USDA loan if you want to buy or refinance real estate in a rural area. USDA loans have below-market rates — similar to VA — and reduced mortgage insurance costs. The catch? You need to live in a ‘rural’ area and have moderate or low income to be USDA-eligible.

Mortgage rate strategies for October 2023

Mortgage rates displayed their famous volatility in 2023. Ongoing inflation battles and Fed hikes drove growth, then uncertainty in the banking sector led to downtrends.

At its July meeting, the Fed made a small hike in its continue fight against inflation. Then in September, the central bank held off on a rate hike, preferring to see if the economy would keep cooling organically. Going forward, the FOMC said it would adjust its policies as necessary — which could mean additional hikes or possibly none at all.

Here are just a few strategies to keep in mind if you’re mortgage shopping in the coming months.

Be ready to move quickly

Indecision can lead to failure or missed opportunities. That holds true in home buying as well.

Although the housing market is becoming more balanced than the recent past, it still favors sellers. Prospective borrowers should take the lessons learned from the last few years and apply them now even though conditions are less extreme.

“Taking too long to decide to make an offer can lead to paying more for the home at best and at worst to losing out on it entirely. Buyers should get pre-approved (not pre-qualified) for their mortgage, so that the seller has some certainty about the deal closing. And be ready to close quickly — a long escrow period will put you at a disadvantage.

And it’s definitely not a bad idea to work with a real estate agent who has access to “coming soon” properties, which can give a buyer a little bit of a head start competing for the limited number of homes available,” said Rick Sharga.

Buyer demand is lower than a typical year, but the market usually heats up in spring and summer. Being decisive (and prepared) should only play to your advantage.

Shopping around isn’t only for the holidays

Since interest rates can vary drastically from day to day and from lender to lender, failing to shop around likely leads to money lost.

Lenders charge different rates for different levels of credit scores. And while there are ways to negotiate a lower mortgage rate, the easiest is to get multiple quotes from multiple lenders and leverage them against each other.

“For potential home buyers, it’s important to get quotes from multiple lenders for a mortgage, as rates can vary dramatically, especially during such a volatile period,” said Odeta Kushi.

As the mortgage market slows due to lessened demand, lenders will be more eager for business. While missing out on the rock-bottom rates of 2020 and 2021 may sting, there’s always a way to use the market to your advantage.

How to shop for interest rates

Rate shopping doesn’t just mean looking at the lowest rates advertised online because those aren’t available to everyone. Typically, those are offered to borrowers with great credit who can put a down payment of 20% or more.

The rate lenders actually offer depends on:

• Your credit score and credit history
• Your personal finances
• Your down payment (if buying a home)
• Your home equity (if refinancing)
• Your loan-to-value ratio (LTV)
• Your debt-to-income ratio (DTI)

To figure out what rate a lender can offer you based on those factors, you have to fill out a loan application. Lenders will check your credit and verify your income and debts, then give you a ‘real’ rate quote based on your financial situation.

You should get three to five of these quotes at a minimum, then compare them to find the best offer. Look for the lowest rate, but also pay attention to your annual percentage rate (APR), estimated closing costs, and ‘discount points’ — extra fees charged upfront to lower your rate.

This might sound like a lot of work. But you can shop for mortgage rates in under a day if you put your mind to it. And shaving just a few basis points off your rate can save you thousands.

Mortgage interest rate FAQ

What are today’s mortgage rates?

Mortgage rates are rising, but borrowers can almost always find a better deal by shopping around. Connect with a mortgage lender to find out exactly what rate you qualify for.

¹Today's mortgage rates are based on a daily survey of select lending partners of The Mortgage Reports. Interest rates shown here assume a credit score of 740. See our full loan assumptions here.

Selected sources:

• https://www.blackknightinc.com/category/press-releases
• https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
• http://www.freddiemac.com/research/datasets/refinance-stats/index.page