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

Tim Lucas
The Mortgage Reports editor

Mortgage rates forecast for January 2019

Mortgage rates caught more downward momentum as 2018 came to a close.

The stock market can’t catch a break, and the Fed is casting shadows on the U.S. economy.

All this is helping mortgage rates, which fare better in riskier economic times.

This could be the chance that patient home buyers and refinance candidates were waiting for throughout 2018.

But the rate dip could be fleeting. If stellar economic reports appear in coming weeks, rates could rise as optimism takes over in the new year.

Lock today's rates before they rise again. (Jan 18th, 2019)

Predictions for January

January will be a wild ride for mortgage rates. Market-moving news will leave rates different than they were in 2018. 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% for 2018.

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. (Jan 18th, 2019)

Mortgage Rate Forecast January 2019

The stock market could falter, helping rates

December 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.

What’s that got to do with mortgage rates? A lot.

A high-risk stock market gets 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 troubled markets? 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 January stock rout.

Lock in your rate here. (Jan 18th, 2019)

Falling oil could help mortgage rates

Expensive oil causes prices for goods and services to rise, meaning inflation occurs. For example, you pay $3 instead of $2.75 for a gallon of milk because a truck had to spend more on fuel.

As this chart shows, inflation makes mortgage rates rise.

Conversely, falling oil creates less inflation pressure and, potentially, downward pressure on interest rates.

Oil is currently in a death spin of sorts.

Oil is currently in a death spin of sorts. It’s currently at a 17-month low and down 40% from its October peak.

Inflationary pressures aside, falling oil is an economic barometer. Oil could be tanking (no pun intended) because of lower demand in the face of an oncoming recession.

No one knows for sure.

The fact remains, though, that mortgage rates generally do better when oil prices get hammered.

Bottom line: Be ready to lock if oil keeps slipping lower.

Lock in your rate here. (Jan 18th, 2019)

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 announcement cast a shadow over what was a very sunny outlook for the new year. The Fed raises rates when it’s confident about the economy, and slows hikes in the face of a downturn. Basically, the most revered economic authority on the planet said, “The U.S. economy won’t be as strong as everyone thought.”

The most revered economic authority on the planet said, “The U.S. economy won’t be as strong as everyone thought.”

That sent stocks lower, and mortgage rates lower too, as investors prepared for a riskier year.

What’s next for the Fed? Watch the post-meeting press conference on January 30. 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 real possibility. As of the time of this writing, the Dow had its worst week in ten years, dropping about 7 percent. The S&P 500 fared even worse.

These types of fallouts light a fire under investors. Individuals and managed fund leaders seek safer assets. A go-to asset is mortgage-backed securities.

As discussed earlier, mortgage rates fall when investors pile into mortgage-backed securities. It’s feasible that 2019 could provide limited windows in which mortgage shoppers can capture very low rates.

Verify your new rate (Jan 18th, 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% 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 (Jan 18th, 2019)

Advice for January 2019

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

Get up to 4 mortgage quotes here. (Jan 18th, 2019)

Homeowners might finally be eligible for a refinance

Refinance shopper sat out 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 lower than they were in May 2018 according to housing agency Freddie Mac. Thirty-year mortgage rates for the week averaged just 4.62 percent the week of December 20. The week of May 24, they averaged 4.66 percent.

Mortgage rates are down 30 basis points (0.30%) since their November highs.

That’s a savings of $55 per month on a $300,000 loan.

If rates keep dropping, refinance shoppers may be enticed into a refinance. 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 even because their credit has improved and they now qualify for a better rate.

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. (Jan 18th, 2019)

Mortgage lenders are more likely to approve your loan

Because rates are at multi-year highs, 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 at their lender. 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 with another lender.

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 5.17% in November.

This is higher than Freddie Mac’s 4.62% 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 (Jan 18th, 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 5.19% in November, while conventional loans averaged 5.17%.

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 (Jan 18th, 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, 30-year VA mortgage rates averaged just 4.99% while conventional loans averaged 5.17%

Check your monthly payment with this VA loan calculator.

There’s incredible value in VA loans.

Verify your VA loan eligibility (Jan 18th, 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 (Jan 18th, 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.

  • Friday, January 4: Fed Chair Jerome Powell speaks
  • Friday, January 4: Nonfarm Payrolls, wages, unemployment rate
  • Wednesday, January 9: FOMC Minutes
  • Friday, January 11: Consumer Price Index (a key inflation gauge)
  • Wednesday, January 16: Retail Sales
  • Thursday, January 17: Housing Starts
  • Friday, January 25: New Home Sales
  • Wednesday, January 30: FOMC Meeting adjourns, press conference

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 over the phone or online, with just a few simple steps to start.

Verify your new rate (Jan 18th, 2019)


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