Mortgage rate and housing market predictions for late-2020


For now, record-low mortgage rates seem set to continue

Homebuyers and refinancers have seen record-breaking mortgage rates all throughout 2020.

Interest rates have been driven down largely due to COVID-19, for which there’s no real end in sight.

That means mortgage rates are likely to stay low through the end of 2020 and beyond.

But could the 2020 election shake things up? Many experts say yes.

Some even believe the election results could raise rates by 1% or more.

Here’s what 10 housing experts predict will happen to mortgage rates and the housing market before the end of the year.

Find a low rate today (Sep 16th, 2020)

Will mortgage and refinance rates change after the 2020 election?

Presidents don’t set mortgage rates. However, they do set the tone for the economy, which has an indirect effect on whether mortgage rates rise or fall.

The experts we interviewed had varying opinions on how much a Trump or Biden win could impact mortgage rates — if at all.

But looking at their predictions on average, there was one clear trend: Experts predict lower rates if Trump is reelected, and slightly higher rates if Biden wins.

Average mortgage rate forecasts for late-2020

2020 Election Winner Average 30-year Mortgage Rate Prediction
Trump 3.09%
Biden 3.51%

Read on to see why the industry experts we interviewed believe rates could rise or fall based on the outcome of the election.

Find and lock a low rate (Sep 16th, 2020)

Expert mortgage rate and housing market predictions for late-2020

We reached out to 10 trusted real estate experts for their 30-year fixed-rate mortgage and real estate market forecast following the 2020 presidential election.

These predictions may help guide you if you’re planning on purchasing a home or refinancing before the end of the year or in 2021.

Dennis Shirshikov, real estate analyst, mortgage rate prediction: 3.5%-4%

Dennis Shirshikov is a real estate analyst with RealEstateWitch.com and adjunct professor of economics at City University of New York.

Mortgage rate prediction if Trump wins: 3.5%

If Trump wins the election: “If Trump wins, the real estate market will slow down, but prices will rise. Housing policy will favor investors and landlords through tax discounts. The Fed will raise interest rates, and mortgage rates will also rise.”

Mortgage rate prediction if Biden wins: 4%

If Joe Biden wins the election: “The real estate market overall will slow down and prices will remain stable. Housing policy will seek to make lending more lenient. The Federal Reserve will raise interest rates, and mortgage rates will rise as well.”

Bruce Ailion, Realtor, mortgage rate prediction: 2.5%-3%

Bruce Ailion is a real estate attorney and Realtor.

Mortgage rate prediction if Trump wins: 2.5%

If Donald Trump wins the election: “Real estate is Donald Trump’s favorite industry. Conservative or liberal, like him or hate him, agree with everything or nothing he does, Trump is the ultimate cheerleader for real estate. If he wins, you have an advocate for lower interest rates, lower taxes, and lower regulation.”

Mortgage rate prediction if Biden wins: About 3%

If Joe Biden wins the election: “The impact of a Biden win on real estate is less certain. We could see a further reduction in the mortgage interest rate deduction, and the same could be true for the deductibility of state, local and property taxes. I expect interest rates to remain low but not as low as in a Trump presidency.”

Rick Sharga, Executive VP at RealtyTrac, mortgage rate prediction: 3.25%-3.5%

Rick Sharga - Mortgage Rate Predictions 2019 from The Mortgage Reports

Rick Sharga is the executive vice president at RealtyTrac.

Mortgage rate prediction if Trump wins: 3.25%

If Donald Trump wins the election: “A second Trump term will likely see very similar policies to what we saw in the first term: less regulatory control and tax incentives to stimulate real estate investment.

“The Trump administration has also discussed an expansion of the Qualified Opportunity Zone program it launched a few years ago, which offers capital gains relief for real estate development in underserved communities.

“The Fannie Mae and Freddie Mac conservatorship will likely end in a second Trump term. This could make loans more readily available for more borrowers but could also make loans more expensive and somewhat riskier.”

Mortgage rate prediction if Biden wins: 3.5%

If Joe Biden wins the election: “Biden has called for more government investment in affordable housing, which could be funded in part by proceeds from fees attached to home sales backed by government agencies like Fannie Mae, Freddie Mac, and the FHA.

“This would make buying a home somewhat more expensive for most people, but might also provide affordable rental properties to people currently rent-burdened.

“It’s also likely that Biden would reinstate some of the regulations and consumer protections in the financial industry that had been removed or eliminated over the past few years.”

Find and lock a low mortgage rate (Sep 16th, 2020)

Ryan Craft, CEO at Saluda Grade, mortgage rate prediction: 3.25%

Ryan Craft is the founder and CEO of Saluda Grade, a real estate advisory firm.

Mortgage rate prediction if Trump wins: 3.25%

If Donald Trump wins the election: “A Trump win will mean the continuation of the status quo — broad support for eviction moratoriums, executive office support for personal subsidies and relief, and an administration that overall seems willing to do anything to soften the blow on the economy.”

Mortgage rate prediction if Biden wins: 3.25%

If Joe Biden wins the election: “Biden most likely will not change much regarding eviction moratoriums and the broad forbearance mandate for COVID-affected homeowners. There will be very little change in the current status of the American housing market and the greatest area of impact: supply.”

Kurt Westfield, Managing Partner at WC Equity Group, mortgage rate prediction: ±3%

Kurt Westfield is Managing Partner at WC Equity Group.

Mortgage rate prediction if Trump wins: About 3%

If Donald Trump wins the election: “Trump will recover losses that coronavirus brought forth and will rapidly restore the position the economy was in before this black swan event. The Fed will likely raise rates to keep excesses at bay. The looming concern is the wave of foreclosures and evictions likely to occur when the moratorium and freezes are lifted.”

Mortgage rate prediction if Biden wins: Higher than 3%

If Joe Biden wins the election: “There will likely be less strength in the housing market, as a whole, as subsidies are enacted that try to shorten the gap between lower-income and high-net-worth individuals.

“The creativity in the private capital world will likely dry up, causing the investment side of housing to stall while the residential side of homeownership likely stays relatively constant. Rates will go up, as will taxes.”

Ryan Fitzgerald, Owner of Raleigh Realty, mortgage rate prediction: 3.25%-4%

Ryan Fitzgerald is a Realtor and the owner of Raleigh Realty and UpHomes.

Mortgage rate prediction if Trump wins: 3.25%

If Donald Trump wins the election: “We will see a lot of what we’ve observed the past four years, with lower interest rates and the opportunity to afford more and leverage more of the government’s and bank’s money. Housing policies are likely to remain the same or similar to what they are now. Interest rates should stay low or possibly go lower.”

Mortgage rate prediction if Biden wins: 4%

If Joe Biden wins the election: “We will see a decent year or two under Biden as it relates to the real estate market overall. However, smart money will begin to sell properties so they don’t have to pay the hefty taxes on homes and the land values that accompany them. Land is likely to become significantly cheaper under Biden, thanks to property tax rate increases. Interest rates will rise along with property taxes.”

Guy Baker, Founder of Wealth Teams Alliance, mortgage rate prediction: 3%-4.1%

Guy Baker is an author and the founder of advisory firm Wealth Teams Alliance.

Mortgage rate prediction if Trump wins: About ~3%

If Donald Trump wins the election: “The economy will likely improve, taxes will stay the same or reduce, and the inflation rate will continue to increase. The Fed is less likely to raise rates unless inflation gets out of control.”

Mortgage rate prediction if Biden wins: 4.1%

If Joe Biden wins the election: “Expect tax rates to rise, the Fed to offset increasing inflation with higher rates, and the economy to slow. All of this will dampen the demand for real estate.”

John Thompson, Dean on the National Institute of Financial Education, mortgage rate prediction: high 2%-low 3%

John Thompson is the founder of C2 Financial Corporation and Dean of the National Institute of Financial Education.

Mortgage rate prediction if Trump wins: High 2% to low 3% range

If Donald Trump wins the election: “We may see more accommodative policies toward the retention and growth of real estate-based assets, which would tend to favor investors as opposed to single-family home buyers. Entry-level points of the market will continue to be strong and robust, and in the upper ends of the market we may see challenges in value and a reduction in prices.”

Mortgage rate prediction post-election: High 2% to low 3% range

If Joe Biden wins the election: “The government may have a more accommodative position toward elements of the housing market when it comes to low- to moderate-income. These areas would likely see greater support, with negative impacts on higher-priced real estate, as higher-income properties are seen as a tax opportunity.”

Find and lock a low mortgage rate (Sep 16th, 2020)

Daryl Fairweather, Chief Economist, Redfin, mortgage rate prediction: N/A

Daryl Fairweather is Chief Economist for Redfin.

Housing forecast if Trump wins: Less development of affordable housing

If Donald Trump wins the election: “While the Trump administration previously advocated for relaxing zoning regulations to encourage more building, President Trump has recently made an about-face — now arguing that local governments that have taken steps to relax or eliminate single-family zoning are threatening the suburbs.

“Given this shift in tone, we can assume that a second-term Trump administration will not be enthusiastic about developing more affordable housing.”

Housing forecast if Biden wins: More development of affordable housing and strengthening of Fair Housing rules

If Joe Biden wins the election: “Biden’s housing platform involves using federal housing grants to encourage states to implement inclusionary zoning that would allow more affordable housing development.

“Biden has proposed plans to reduce discriminatory practices in the housing industry and would reinstate the Obama-era Affirmatively Furthering Fair Housing rule, recently terminated by President Trump.”

Natalie Campisi, senior mortgage and housing expert at Forbes Advisor, mortgage rate prediction: N/A

Natalie Campisi is a senior mortgage and housing expert at Forbes Advisor.

Housing forecast if Trump wins: Loosening of Fair Housing rules and less support for affordable housing

If Donald Trump wins the election: “Expect to see rules around fair housing loosen. Trump’s recent action that repealed the Affirmatively Furthering Fair Housing rule, which was designed to ensure that municipalities receiving HUD dollars were taking direction action against discriminatory housing practices, is indicative of this.

“Furthermore, stringent zoning laws — that have hobbled construction in many states — will likely get no help from Trump as he has made several remarks about saving the suburbs from low-income housing.”

Housing forecast if Biden wins: Expanded access to affordable housing and aid for renters

If Joe Biden wins the election: “Biden has a broad housing plan that would touch the lives of almost all Americans. He has proposed to expand the housing voucher program, which helps the poorest American secure housing.

“He would also curb single-family zoning for entities that receive HUD dollars. Biden would further enact legislation that allows renters who pay more than 30 percent of their income and housing to get a tax deduction.”

Why presidential elections impact mortgage and refinance rates

You may not think that a presidential election would affect your ability to purchase a home. But the experts say it could have an impact on housing, even in small ways.

“The presidential election and its results generally affect the real estate market indirectly — but not insignificantly,” says Sharga.

He explains: “The incoming administration’s policies will generally have an impact on the economy and people’s financial outlook.

“For example, an administration that comes into office with plans to dramatically increase government spending can cause interest rates to go up, making buying a home less affordable.

“On the other hand, an administration touting tax cuts might entice businesses to invest in future growth and hire more employees — a cycle that often leads to those employees buying homes,” Sharga says.

“The presidential election and its results generally affect the real estate market indirectly — but not insignificantly” —Rick Sharga, Executive Vice President, RealtyTrac

Natalie Campisi, senior mortgage and housing expert at Forbes Advisor, notes that mortgage rates are not set by the president but can be indirectly influenced by presidential actions.

“The president can also influence the housing market in a number of other ways apart from mortgage rates,” she says.

“For instance, Trump’s tariffs on Canadian lumber have driven up the cost of building materials, which has put more burden on new housing construction.”

The gap in fiscal and economic policies between Joe Biden and Donald Trump is a wide one.

Whoever wins will have significant repercussions on the way Wall Street and Main Street view the economy looking ahead, believes Kurt Westfield.

“Each candidate’s tax plans and job growth agendas will play a large role in the stagnation or continued growth of the economy overall, which can affect interest rates and the housing market,” says Westfield.

When is the right time to lock a mortgage or refinance rate?

If you want to buy a house or refinance in the coming months, your decision on when to move should depend on your financial readiness.

Rates seem likely to stay ultra-low at least until the election, so it might be best to finance sooner rather than later.

But it’s never a good idea to rush into a mortgage if you’re not quite ready. So if you’re still getting your finances and credit in order, it’s ok to wait.

Rates may stay low for a long time. But even in a worst-case scenario — say rates rise to 4%, the highest prediction we received — they’ll still be lower than nearly all of U.S. history. So those waiting to buy likely aren’t putting too much at stake.

For homebuyers and refinancers who are already in the process, our advice remains the same:

Don’t wait for rates to fall much more before locking, because they’re not likely to move down a significant amount.

Mortgage and refinance rates are already near record lows, and those who can lock at today’s rates are in a very good position.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

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Mortgage and refinance rates today, September 9, 2020

Today’s mortgage and refinance rates 

Average mortgage rates fell modestly yesterday. And, after a couple of days of rises, that was good news. A new all-time low could be days away — unless markets recover and push them higher again. Conventional loans today start at 2.875% (2.875% APR) for a 30-year, fixed-rate mortgage. 

Find and lock a low rate (Sep 16th, 2020)

Current mortgage and refinance rates 

Program Rate APR* Change
Conventional 30 yr Fixed 2.875 2.875 Unchanged
Conventional 15 yr Fixed 2.625 2.625 Unchanged
Conventional 5 yr ARM 3.875 3.094 Unchanged
30 year fixed FHA 2.25 3.226 Unchanged
15 year fixed FHA 2.25 3.191 Unchanged
5 year ARM FHA 2.5 3.239 Unchanged
30 year fixed VA 2.25 2.421 Unchanged
15 year fixed VA 2.25 2.571 Unchanged
5 year ARM VA 2.5 2.419 Unchanged
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Sep 16th, 2020)


COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

There’s a real likelihood of upward pressure on mortgage rates next month. This is all down to a regulatory action that imposes new fees on some Fannie Mae and Freddie Mac refinances. But lenders are likely to charge the fee in the form of a higher mortgage rate. And, although that should apply only to such refinances, it’s likely to skew the average for all mortgage rates. If you want a refinance from Fannie or Freddie, act soon!

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

Compare top refinance lenders

Market data affecting today’s mortgage rates 

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys inched back up to 0.68% from 0.67%. (Bad for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were higher. (Bad for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices rose to $37.33 from $36.81. (Neutral for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices jumped to $1,951 an ounce from $1,918. (Good for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
  •  CNN Business Fear & Greed index rose to 59 from 56 out of a possible 100 points. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Time was when those numbers gave a good indication of where mortgage rates would move during a day. But with the Fed now intervening invisibly in the mortgage market, that’s no longer the case.

So use markets only as a rough guide. They have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. Today they’re looking a little worse for mortgage rates as markets appear to begin finding their feet after recent mayhem.

Find and lock a low rate (Sep 16th, 2020)

Important notes on today’s mortgage rates

Here’s some stuff you need to know:

  1. The Fed’s ongoing interventions in the mortgage market ($1 trillion and counting) should put continuing downward pressure on these rates. But it can’t work miracles all the time. So expect short-term rises as well as falls. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand that aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. At times of high demand, lenders can push up rates as a way of managing their workflow. Neither markets nor the Fed can help when that happens

So there’s a lot going on here. And nobody can claim to know with certainty what’s going to happen to mortgage rates in coming hours, days, weeks or months. But see what 10 experts think could happen between now and the end of this year:

Are mortgage and refinance rates rising or falling?

Over the last few months, the overall trend for mortgage rates has clearly been downward. A new all-time low was set early in August and another looked possible last week — before better-than-expected employment data snatched that possibility away. Still, a new one remains tantalizingly close.

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

Expert mortgage rate forecasts

And here are their current rates forecasts for the last two quarters of 2020 (Q3/20 and Q4/20) and the first two of 2021 (Q1/21 and Q2/21).

Note that Fannie’s and the MBA’s are updated monthly while Freddie’s are published quarterly So Freddie’s sometimes feel stale. The numbers in the table below are for 30-year, fixed-rate mortgages:

Forecaster Q3/20 Q4/20 Q1/21 Q2/21
Fannie Mae 3.0% 2.9% 2.8% 2.7%
Freddie Mac 3.3% 3.3% 3.2% 3.2%
MBA 3.0% 3.1% 3.1% 3.1%

So expectations vary considerably. You pays yer money …

Find your lowest rate today

It’s always been important to shop widely for your new mortgage or refinance. You stand to save thousands over just a few years by getting quotes from multiple lenders and comparing them carefully.

But you’ve rarely had more to gain by shopping around than you do now. The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. Worse, some are making it harder to get any mortgage at all if you want a cash-out refinance, a loan for an investment property, a jumbo loan or if your credit score is damaged.

So shopping around could save you a bundle.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

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How mortgage rates are determined and why you should care

How are mortgage rates set?

If you’re shopping for a mortgage or refinance rate, you may have noticed some odd things.

Rates can vary a lot from lender to lender. Sometimes refinance rates are different from purchase rates.

And mortgage rates may seem a lot higher today than they were yesterday.

It can seem tough to navigate the market and find a low rate when there are so many moving pieces.

But with a basic knowledge of how mortgage rates are determined, you can shop like a pro and save a lot of money in the long run.

Verify your new rate (Sep 16th, 2020)


In this article (Skip to…)


The three factors that determine mortgage rates

There are three factors that influence your mortgage or refinance rate.

  1. The economy
  2. You
  3. Your mortgage lender

We’ll describe each of these factors in detail below. But here’s a brief overview of how all three work together to determine your mortgage rate:

  • The strength of the U.S. economy sets the overall tone for mortgage rates. When the economy is strong, rates tend to rise. When it’s weak, rates tend to fall
  • Individual factors determine whether you’re on the high or low end of the mortgage rate spectrum. For instance, say the economy is in a low-rate period, averaging around 3% for a 30-year loan. A borrower with high credit and a big down payment might get a rate closer to 2.5%, while someone with lower credit could be offered 3.5%
  • Lenders offer different rates to different customers, depending on what types of loans they specialize in and how much capacity they have for new business. That’s why it’s important to shop for mortgage rates with more than one lender

If you’re currently shopping for mortgage or refinance rates, that last point is probably most important.

You can’t change the overall rate environment. And unless you have a few months, it’s tough to raise your credit substantially or save for a bigger down payment.

But you can always shop around with multiple lenders.

Odds are, there’s a lower rate out there than the first one you’re offered. You just have to look for it.

Shop mortgage and refinance rates (Sep 16th, 2020)

How the economy affects mortgage rates

The strength of the U.S. economy, and investor confidence, determine whether we’re in an overall ‘high-rate’ or ‘low-rate’ environment at any given time. Here’s how it works.

Mortgage-backed securities (MBS) set the tone for mortgage rates

The first thing to recognize is that most mortgages are owned by lenders for only a brief period.

Soon after closing, they’re typically bundled up within a pile of other mortgages and sold on a secondary market to investors. That way, the lender has more money to lend to the next borrower.

Each bundle is called a mortgage-backed security (MBS). An MBS is a type of bond: a fixed-income financial instrument that investors all over the world can purchase.

How the MBS market affects rates

Lenders constantly monitor the secondary market where MBS are traded.

On many days, MBS prices move hundreds of times. And, if those movements are large, lenders can change their rates multiple times as they try to keep up.

When demand for (and thus the price of) MBS goes up, mortgage rates typically go down.

This often happens when the economy is uncertain or on a downward trend.

At these times, investors want to put their money somewhere safe — and MBS are generally a safe investment. So more money will flood into the mortgage market, causing borrowers’ rates to fall.

For a real-life example of this, just look at what the Federal Reserve has done for mortgage rates during coronavirus…

The Fed’s new role in determining mortgage rates

Once the Covid-19 pandemic took hold, the Federal Reserve moved swiftly to shore up markets and confidence. Much of that went into buying all sorts of bonds, including MBS.

Normally, the Fed plays no part in setting mortgage rates. Even when it adjusts its own rates, that doesn’t directly affect those for home loans.

It might change the mood of investors in the MBS secondary market. But you shouldn’t expect to pay less for your new mortgage just because the Fed drops its rates.

But, by buying more than $1 trillion of MBS, the Fed has been affecting mortgage rates directly, though almost invisibly.

Such a big new buyer pushes up MBS prices and so reduces yields and mortgage rates.

Keep an eye on the news if you’re rate shopping

So you can see that when it comes to understanding how mortgage rates are determined, the economy is a huge factor. When it’s booming, mortgage rates are typically high. When it’s in trouble, they’re usually low.

And that applies on a daily basis. An unexpectedly great economic report can push mortgage rates higher, while one that’s spectacularly worse than expected can push them downward.

That’s why it’s important to keep an eye on the news when you’re shopping for mortgage rates. They could drop at any time, and you want to be ready to lock when the time is right.

Verify your new rate (Sep 16th, 2020)

How you influence your own mortgage rate

Lenders offer widely different rates to different applicants.

You’ll also find that various lenders will offer you different rates — even though you give them all the same information.

The reason is that lenders evaluate borrowers according to their own standards. Based on each lender’s formula, they might label you as a ‘safer’ or ‘riskier’ borrower, and they’ll adjust your rate accordingly.

Lenders employ three main criteria when deciding the rate you’ll be offered:

  1. Your credit score and report — Your record for managing debts in the past is the best indicator of how you’ll handle this new debt
  2. Your down payment (a.k.a. “loan-to-value ratio” or “LTV”) — The more money you contribute to the purchase, the less a lender stands to lose if things go wrong
  3. How big a burden your existing debts are (a.k.a. “debt-to-income ratio” or “DTI”) — Someone struggling to keep up with existing monthly payments may find a mortgage and additional homeownership costs the final straw

If you’ve time, you can make all three of those better. You can work on your credit score, save a bigger down payment and pay down some debt.

Of course, it’s tough to do all three of those at once. And nobody expects miracles. But even just tweaking one, two, or all of those can earn you a lower rate and monthly payment.

Verify your new rate (Sep 16th, 2020)

The other way you affect your mortgage rate

Speaking of lower rates and monthly payments, your willingness to comparison shop for your best mortgage deal makes a big difference.

Back in 2016, federal regulator the Consumer Financial Protection Bureau (CFPB) carried out a study that found 30% of borrowers were not comparison shopping for their mortgage. Worse, more than 75% were applying to only one lender!

The CFPB report goes on:

“Previous Bureau research suggests that failing to comparison shop for a mortgage costs the average homebuyer approximately $300 per year and many thousands of dollars over the life of the loan.”

So it’s worth your time to shop around and find the lowest rate. In fact, you can rate shop in just one day and likely find a better deal than your first offer.

Why lenders offer different rates to different customers

We’ve covered the main points behind our original question, “How are mortgage rates determined?”

But that doesn’t explain why different lenders quote the same borrower such wildly different rates. So let’s tackle that.

Different lenders tend to specialize in different categories of borrowers.

  • So some lenders might develop a niche market, offering deals to the most creditworthy borrowers
  • Others might help people with challenging scores, maybe as low as the 500s
  • And some lenders specialize in certain loan programs; like self-employed mortgages or jumbo loans

If your score is 580 and you apply to a lender that specializes in higher-credit borrowers, you’ll likely be turned down. Or maybe you’ll be offered a too-high rate that’s designed to deter you.

And the same applies if your score is 800 and you apply to a lender used to helping those with low scores. You’ll likely be offered a loan, but it might not be at the best possible rate for a borrower like you.

Another reason for variations in lenders’ rates

Lenders can also change their mortgage rates based on their current workload.

When loan officers and systems are overwhelmed by new loans, lenders are sometimes forced to manage demand by deterring new applicants. And they do that by raising their rates.

Lenders are unlikely to say, “We’re too busy for you,” or, “We currently don’t have enough money to lend to you.”

Instead, they put you off with worse deals. And if that doesn’t work, they’re happy to fit you in somehow, and pocket the extra profit you gifted them.

All this means you need to shop around for your new mortgage or refinance, even if you absolutely adore your existing lender.

Not only might your financial circumstances have changed since you applied for your current loan, so you’d be better off with a different one.

But also, yours might not be as competitive right now as when you first started working with them.

Are mortgage rates and refinance rates the same?

Normally, mortgage and refinance rates are similar. So a 30-year fixed-rate loan to buy a house should have a similar rate to a 30-year fixed-rate refinance.

But sometimes mortgage and refinance rates drift apart. And it’s usually for one of two reasons:

  1. Too much demand for purchase or refinance loans — As we’ve already established, lenders sometimes put up rates to deter demand. And, if it’s refinances causing excessive work (it usually is), a lender might charge more for those
  2. One’s more profitable than the other — Lenders aren’t charities. They will take the chance to make more profit by prioritizing home purchase mortgages over refinances or vice versa

How often do mortgage rates change?

We’ve already mentioned that the prices and yields of MBS can change hundreds of times in a single, busy day. That secondary market is a bit like stock markets in that one respect.

And it’s true that lenders monitor changes in real-time. But they don’t issue hundreds of new rates every day.

Indeed, when things are quiet in the secondary market, they might bring out just one new rate sheet, if any.

If things are a bit more volatile in the MBS market, a lender might issue a morning and afternoon rate sheet. But that volatility would have to be extreme for them to rush out many more.

The mechanics of mortgage rate movements: What causes rates to rise and fall?

In normal times, mortgage interest rates depend a great deal on the expectations of investors.

Good economic news tends to be bad for interest rates because an active economy raises concerns about inflation.

Inflation causes fixed-income investments like bonds to lose value, and that causes their yields (another way of saying interest rates) to increase.

For example, suppose that two years ago, you bought a $1,000 bond paying 5% interest ($50) each year. (This is called its “coupon rate” or “par rate” because you paid $1,000 for a $1,000 bond, and because its interest rate equals the rate stated on the bond — in this case, 5%).

  • Your interest rate: $50 annual interest / $1,000 = 5.0%

When mortgage rates fall

That’s a pretty good rate today, so lots of investors want to buy it from you.

You can sell your $1,000 bond for $1,200. The buyer gets the same $50 a year in interest that you were getting. It’s still 5% of the $1,000 coupon. However, because he paid more for the bond, his return is lower.

  • Your buyer’s interest rate: $50 annual interest / $1,200 = 4.2%

The buyer gets an interest rate, or yield, of only 4.2%. And that’s why, when demand for bonds increases and bond prices go up, interest rates go down.

When mortgage rates rise

However, when the economy heats up, the potential for inflation makes bonds less appealing. With fewer people wanting to buy bonds, their prices decrease, and then interest rates go up.

Imagine that you have your $1,000 bond, but you can’t sell it for $1,000 because unemployment has dropped and stock prices are soaring. You end up getting $700. The buyer gets the same $50 a year in interest, but the yield looks like this:

  • $50 annual interest / $700 = 7.1%

The buyer’s interest rate is now higher. Interest rates and yields are not mysterious. You calculate them with simple math.

When should you lock a mortgage rate?

If mortgage rates are constantly changing, how do you know when it’s time to lock in a rate?

Luckily, it’s not as tough as it sounds.

You’ll likely have a short window for rate shopping before it’s time to lock and move forward with the loan.

And in that time, you shouldn’t expect rates to rise or fall too dramatically. Movements are typically small from one day to the next.

So the decision is less about timing your rate lock, and more about choosing the right lender.

You’ll likely save more by comparison shopping than by trying to play the market, since even seasoned economists have trouble predicting how mortgage rates will move.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

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Tips for getting a mortgage with a 680 credit score

Can I get a mortgage with
a 680 FICO score?

A home buyer with a 680 credit score is
likely to be approved for most mortgage types, provided other criteria are also
met.

However, 680 is on the lower end of the “good” spectrum. This means you won’t receive the same interest rates as a prime borrower (i.e. someone with a credit score of 720+ and a big down payment).

But the good news is, even with credit in the 600s,
you’re likely to get a better rate now than someone with ‘prime’ credit would
have gotten a year or two ago.

Today’s mortgage rates have fallen so far that regardless
of credit, there are good deals to be had for those who take the time to shop
around.

Find a low rate for your credit score (Sep 16th, 2020)


In this article (Skip to…)


Is 680 a good credit score?

FICO puts a 680 credit score in the “good” range. That means
a 680 credit score is high enough to qualify you for most loans.

However, while 680 is a good credit score, it’s not the
most competitive one.

What do we mean by that?

Well, in the second quarter of 2020, the median credit score for new mortgages was 784. And about 75% of mortgage borrowers had a credit score above 700.

So when mortgage lenders are looking at a 680 credit score,
they’ll typically see it as good enough to qualify you for a loan — but not
high enough to offer ultra-low rates.

That means it’s extra important to shop around with a few
different lenders before deciding on a mortgage loan.

All lenders evaluate credit a little differently, and some are
specifically geared toward borrowers with moderate credit scores.

One of these companies will be able to offer you a lower
rate than a lender that prefers borrowers with scores in the mid- to high-700s.

Find a low rate for your credit score (Sep 16th, 2020)

Mortgage loans
you can get with 680 credit

As mentioned above, a 680 credit score is high enough to
qualify for most major home loan programs.

That gives you some flexibility when choosing a home loan.
You can decide which program will work best for you based on your down payment,
monthly budget, and long-term goals — not just your credit score.

Here’s a high-level comparison of the different mortgage
loans you can get with a 680 credit score:

Mortgage Loan Type Minimum Credit Score & Down Payment Mortgage Insurance Best For
Conventional 97

620

3%

PMI required, but can be cancelled later Borrowers with a down payment of 3% and good credit

Fannie Mae HomeReady/

Freddie Mac Home Possible

620

3%

PMI required, but can be cancelled later Lower-income home buyers
Conventional Loan

620

5%

PMI required with less than 20% down Borrowers with a down payment of 5% or more
FHA Loan

580

3.5%

Mortgage insurance premium (MIP) required Lower-credit borrowers
VA Loan

580

0%

No continuing mortgage insurance Veterans and service members
USDA Loan

640

0%

Mortgage insurance required, but it’s lower-cost than FHA or conventional Buying a home in a rural area

Home buyers in the 680 range might find themselves deciding between an FHA loan or a conventional loan.

If you can make a 20% down payment, getting a conventional
loan should be a no-brainer since you’ll be spared the cost of mortgage
insurance.

If you’re making a smaller down payment, you may be better
off with a 3%-down conventional loan than an FHA loan. Options include the
conventional 97 loan, the Fannie Mae HomeReady loan, and the Freddie Mac Home Possible
loan.

Both types — conventional and FHA — require mortgage insurance. However, a conventional loan allows you to cancel mortgage insurance later on without refinancing the mortgage. Plus, there’s no upfront mortgage insurance fee on a conventional loan like there is on an FHA loan.

FHA is typically the better choice for people with credit
scores in the high 500s to low 600s, who aren’t quite over the threshold of qualifying
for a conventional loan.

And for anyone with eligible military service, a VA loan is
often the best choice. VA loan rates are usually the lowest on the market, and
no down payment is required. So if you’re a service member, veteran, or have
another military affiliation, this option is worth looking into.

Find the best mortgage loan for you (Sep 16th, 2020)

Mortgages that are harder to get with 680 credit

There are a few mortgage loan types that will be tougher to
get with 680 credit. Namely:

  • Jumbo loans — Typically require a 700-720 credit score or higher. In most parts of the U.S. a jumbo loan is any mortgage over $510,400
  • 80/10/10 loans — This is a sort of hybrid mortgage that involves getting both a traditional mortgage loan and a home equity loan at the same time to avoid mortgage insurance. 80/10/10 loans might be available with a credit score of 680, but it will be easier to get one with a score in the 700s
  • Home equity loan or home equity line of credit (HELOC) — Home equity financing may be available with a 680 credit score. But many lenders set their own minimums starting at 700 or higher

If you’re looking to buy a more expensive home or tap into
your home equity, it might be worth raising your credit score a little before
you apply.

Even if you can qualify for one of these loans with a score of exactly 680, you’ll get better rates if your score is 700 or above.

How a 680
credit score affects mortgage rates

Conventional loan mortgage rates vary widely based on a
borrower’s credit score.

Prime mortgage borrowers —
those with 20% down and a credit score above 720 — get access to the “best and
lowest mortgage rates” you see advertised online and in print. Everyone else
gets access to something different.

When it comes to setting rates, 680 is right in the middle
of the line.

Take a look at a snapshot of FICO’s mortgage rate tool, which shows how rates vary based on credit score:  

Credit Score APR1 Monthly Payment
760-850 2.501% $1,186
700-759 2.723% $1,220
680-699 2.900% $1,249
660-679 3.114% $1,283
640-659 3.544% $1,355

1APR refers to the ‘effective interest rate’ you’ll pay each year after the
mortgage rate and loan fees are combined

2This rate snapshot was taken on September 8, 2020, and is for sample purposes only. It assumes a loan amount of $300,000. Your own interest rate and monthly payment will vary. Get a custom mortgage rate estimate here

In this example, the borrower with a 680 credit score pays
$63 more per month than someone with a 760 credit score.

That might sound like a small difference. But it adds up to
$750 more per year, and an extra $22,500 over the course of a 30-year loan.

This is why experts recommend getting your credit score up
as much as possible before applying for a home loan. Small differences in the
short term can mean big savings in the long run.

Tips to get the best mortgage rate

As any mortgage professional will tell you, the only way to find
the lowest mortgage rate is by shopping around.

Get estimates from at least three lenders — and remember to look at more than just the interest rate. Also compare:

  • APR — Your ‘effective’ rate when fees and loan costs are added in
  • Points — Is the lender charging extra via “discount points” to reach the offered rate?
  • Closing costs — How much does the lender charge upfront to set up your loan?

These figures will show you which lender is offering the
best deal overall, not just a low rate with hidden fees that jack up the cost.

Remember, a 680 credit score is right on the borderline of “good.”

So it’s even more important to find a lender that will look
at your credit profile favorably and offer you a great deal on your mortgage.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

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Mortgage and refinance rates today, September 10, 2020

Today’s mortgage and refinance rates 

Average mortgage rates held steady yesterday. So they remain within striking distance of the all-time low. Conventional loans today start at 2.75% (2.75% APR) for a 30-year, fixed-rate mortgage. 

Find and lock a low rate (Sep 16th, 2020)

Current mortgage and refinance rates 

Program Rate APR* Change
Conventional 30 yr Fixed 2.75 2.75 Unchanged
Conventional 15 yr Fixed 2.625 2.625 Unchanged
Conventional 5 yr ARM 3.75 3.05 +0.01%
30 year fixed FHA 2.25 3.226 Unchanged
15 year fixed FHA 2.25 3.191 Unchanged
5 year ARM FHA 2.5 3.258 +0.01%
30 year fixed VA 2.25 2.421 Unchanged
15 year fixed VA 2.25 2.571 Unchanged
5 year ARM VA 2.5 2.44 +0.01%
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Sep 16th, 2020)


Earlier this week, we slimmed down this daily article to make it easier for you to read. But we transferred much of the detail to a new stand-alone article: How mortgage rates are determined and why you should care

COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

I personally think there’s a good chance that the Federal Reserve’s large and continuing interventions in the mortgage market will keep mortgage rates low — and perhaps push them lower. But even the Fed can’t determine rates all the time. And some periods of rises are probably inevitable.

That’s why I suggest you lock within a couple of weeks of closing. You minimize your risk of having to lock during a bad patch while maximizing the time you get to benefit from the recent downward trend.

But there’s still some danger from unexpected events. And you must decide when to lock based on your personal tolerance for risk.

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

Compare top refinance lenders

Market data affecting today’s mortgage rates 

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys climbed to 0.71% from 0.68%. (Bad for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were higher. (Bad for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices rose to $37.92 from $37.33. (Neutral for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices increased to $1,970 an ounce from $1,951. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
  •  CNN Business Fear & Greed index moved up to 63 from 59 out of a possible 100 points. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Time was when those numbers gave a good indication of where mortgage rates would move during a day. But with the Fed now intervening invisibly in the mortgage market, that’s no longer the case.

So use markets only as a rough guide. They have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. Today they’re looking a little worse for mortgage rates as markets continue their resurgence, in spite of this morning’s disappointing weekly unemployment numbers.

Find and lock a low rate (Sep 16th, 2020)

Important notes on today’s mortgage rates

Here’s some stuff you need to know:

  1. The Fed’s ongoing interventions in the mortgage market ($1 trillion and counting) should put continuing downward pressure on these rates. But it can’t work miracles all the time. So expect short-term rises as well as falls. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand that aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. At times of high demand, lenders can push up rates as a way of managing their workflow. Neither markets nor the Fed can help when that happens

So there’s a lot going on here. And nobody can claim to know with certainty how mortgage rates will move in coming hours, days, weeks or months. But see what 10 experts think could happen between now and the end of this year:

Are mortgage and refinance rates rising or falling?

Over the last few months, the overall trend for mortgage rates has clearly been downward. A new all-time low was set early in August and another looked possible last week — before better-than-expected employment data snatched that possibility away. Still, a new one remains tantalizingly close.

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

Expert mortgage rate forecasts

And here are their current rates forecasts for the last two quarters of 2020 (Q3/20 and Q4/20) and the first two of 2021 (Q1/21 and Q2/21).

Note that Fannie’s and the MBA’s are updated monthly while Freddie’s are published quarterly So Freddie’s sometimes feel stale. The numbers in the table below are for 30-year, fixed-rate mortgages:

Forecaster Q3/20 Q4/20 Q1/21 Q2/21
Fannie Mae 3.0% 2.9% 2.8% 2.7%
Freddie Mac 3.3% 3.3% 3.2% 3.2%
MBA 3.0% 3.1% 3.1% 3.1%

So expectations vary considerably. You pays yer money …

Find your lowest rate today

It’s always been important to shop widely for your new mortgage or refinance. You stand to save thousands over just a few years by getting quotes from multiple lenders and comparing them carefully.

But you’ve rarely had more to gain by shopping around than you do now. The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. Worse, some are making it harder to get any mortgage at all if you want a cash-out refinance, a loan for an investment property, a jumbo loan or if your credit score is damaged.

So shopping around could save you a bundle.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

tinyurlis.gdv.gdv.htu.nuclck.ruulvis.netshrtco.detny.im

Mortgage and refinance rates today, September 11, 2020

Today’s mortgage and refinance rates 

Average mortgage rates inched higher yesterday. But they remain close to the all-time low set last month. Conventional loans today start at 2.75% (2.75% APR) for a 30-year, fixed-rate mortgage. 

Find and lock a low rate (Sep 16th, 2020)

Current mortgage and refinance rates 

Program Rate APR* Change
Conventional 30 yr Fixed 2.75 2.75 -0.13%
Conventional 15 yr Fixed 2.625 2.625 Unchanged
Conventional 5 yr ARM 3.75 3.05 Unchanged
30 year fixed FHA 2.25 3.226 Unchanged
15 year fixed FHA 2.25 3.191 Unchanged
5 year ARM FHA 2.5 3.258 Unchanged
30 year fixed VA 2.25 2.421 Unchanged
15 year fixed VA 2.25 2.571 Unchanged
5 year ARM VA 2.5 2.44 Unchanged
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Sep 16th, 2020)


Earlier this week, we slimmed down this daily article to make it easier for you to read. But we transferred much of the detail to a new stand-alone article:

COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

Since the Federal Reserve started intervening in the mortgage market in response to the pandemic, there have been relatively few sharp rises and falls in rates. We’ve mostly seen smaller nudges up and down, with those downs outweighing the ups.

Absent momentous or exceptional events, I personally see little reason to think that happy situation will change, at least over the next month or so. Yes, there are almost bound to be periods of higher rates. But only a bit higher. And, overall, they may well slide a little lower.

However, all bets are off if the presidential election result is so close that it’s disputed. Rates then could move sharply higher. So, if you’re planning that far ahead, you might choose to schedule your locking for before Nov. 3.

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

Compare top refinance lenders

Market data affecting today’s mortgage rates 

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys fell to 0.68% from 0.71%. (Good for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were modestly higher. (Bad for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices dropped to $37.16 from $37.92. (Good for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices moved lower to $1,959 an ounce from $1,970. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
  •  CNN Business Fear & Greed index nudged down to 61 from 63 out of a possible 100 points. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Time was when those numbers gave a good indication of where mortgage rates would move during a day. But with the Fed now intervening invisibly in the mortgage market, that’s no longer the case.

So use markets only as a rough guide. They have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. Today they’re looking OK for mortgage rates as investors remain torn between competing wants and needs.

Find and lock a low rate (Sep 16th, 2020)

Important notes on today’s mortgage rates

Here’s some stuff you need to know:

  1. The Fed’s ongoing interventions in the mortgage market ($1 trillion and counting) should put continuing downward pressure on these rates. But it can’t work miracles all the time. So expect short-term rises as well as falls. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand that aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. At times of high demand, lenders can push up rates as a way of managing their workflow. Neither markets nor the Fed can help when that happens

So there’s a lot going on here. And nobody can claim to know with certainty what’s going to happen to mortgage rates in coming hours, days, weeks or months. But see what 10 experts think could happen between now and the end of this year:

Are mortgage and refinance rates rising or falling?

Over the last few months, the overall trend for mortgage rates has clearly been downward. A new all-time low was set early in August and another looked possible last week — before better-than-expected employment data snatched that possibility away. Still, a new one remains tantalizingly close.

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

Expert mortgage rate forecasts

And here are their current rates forecasts for the last two quarters of 2020 (Q3/20 and Q4/20) and the first two of 2021 (Q1/21 and Q2/21).

Note that Fannie’s and the MBA’s are updated monthly while Freddie’s are published quarterly So Freddie’s sometimes feel stale. The numbers in the table below are for 30-year, fixed-rate mortgages:

Forecaster Q3/20 Q4/20 Q1/21 Q2/21
Fannie Mae 3.0% 2.9% 2.8% 2.7%
Freddie Mac 3.3% 3.3% 3.2% 3.2%
MBA 3.0% 3.1% 3.1% 3.1%

So expectations vary considerably. You pays yer money …

Find your lowest rate today

It’s always been important to shop widely for your new mortgage or refinance. You stand to save thousands over just a few years by getting quotes from multiple lenders and comparing them carefully, according to the Consumer Financial Protection Bureau.

But you’ve rarely had more to gain by shopping around than you do now. The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. Worse, some are making it harder to get any mortgage at all if you want a cash-out refinance, a loan for an investment property, a jumbo loan or if your credit score is damaged.

So shopping around could save you a bundle.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

tinyurlis.gdv.gdv.htu.nuclck.ruulvis.netshrtco.detny.im

7 low credit score home loans (starting at 500 FICO)

What’s the minimum credit score for a home loan?

Buyers are often surprised at the range of low credit score home loans available today.

Most lenders will
issue government-backed FHA loans and VA loans starting at a 580 credit score. Some
even start as low as 500-579 (though these lenders are harder to find).  

With a credit score above 600, your options open up even more. Low-rate conventional mortgages only require a 620 score to qualify. And with a credit score of 680 or higher, you could apply for just about any home loan.

So the question isn’t always “can I qualify for a mortgage?,” but rather “which one is best for me?”

Find the right low credit home loan for you (Sep 16th, 2020)


In this article (Skip to…)


Compare low credit score home loans

Some mortgages are
specifically designed to help lower credit applicants get into homes. Here are
seven different options that may work for you:

Mortgage Type Minimum Credit Score Recommended For
FHA Loan 500 (with 10% down)
580 (with 3.5% down)
Borrowers with credit scores from 500-620
VA Loan 580 (can vary by lender)   Eligible veterans and servicemembers
USDA Loan 640 Buying a house in a rural area
Conventional Loans 620 Borrowers with moderate to good credit
Freddie Mac Home Possible 620 Low- to moderate-income borrowers
Fannie Mae HomeReady 620 Low- to moderate-income borrowers
Non-qualified (Non-QM) Mortgages 500-580 Borrowers who don’t qualify for a conventional or government-backed loan

Find the right low credit home loan for you (Sep 16th, 2020)

1. FHA mortgage: Minimum credit score 500

FHA loans — backed by the Federal Housing Administration —
are specifically designed for lower-credit borrowers.

Most lenders offer FHA loans starting at a 580 credit score.
If your score is 580 or higher, you only need to put 3.5% down.

For those with lower credit (500-579), it might still be
possible to get an FHA loan. But you’ll need to put at least 10% down, and it
can be harder to find lenders that allow a 500 minimum credit score.

Another appealing quality of an FHA loan is that, unlike conventional loans, FHA backed loans don’t carry “risk-based pricing”. This is also known as “loan-level pricing adjustments” (LLPA).

Risk-based pricing is a fee
assessed to applications with lower credit scores or other less-than-ideal
traits.

There may be some interest
rate “hits” for lower credit scores, but they tend to be significantly less
than for conventional loans.

For homeowners, this means
lower credit scores don’t necessarily come with higher interest rates.

Verify your FHA loan eligibility (Sep 16th, 2020)

2. VA mortgage: Minimum credit score 580

VA
loans are popular mortgage loans offered to veterans, service members,
and some eligible spouses and military-affiliated people.

These loans do not require a
down payment, nor any mortgage insurance. They also typically have the
lowest interest rates on the market.

Technically, there’s no minimum credit score for a VA loan.
However, most lenders impose a minimum score of at least 580. And some start as
high as 620.

Similar
to FHA loans, though, VA loans don’t have risk-based pricing adjustments.
Applicants with low scores can get rates similar to those for high-credit
borrowers.

Verify your VA loan eligibility (Sep 16th, 2020)

3. USDA home loan: Minimum
credit score 640

Many homeowners are drawn to
this third type of government loan thanks to its zero-down payment requirement.

Most lenders will require a
640 FICO score to qualify for a USDA loan, although some will go down to 580.

As with FHA and VA loans,
however, USDA homeowners with a 580 credit score will be more carefully
evaluated than those with a higher credit score.

Verify your USDA loan eligibility (Sep 16th, 2020)

4. Conventional loans: Minimum
credit score 620

Non-government conventional
mortgage loans require higher rates and fees for low credit scores.

Fannie Mae and Freddie Mac,
the agencies that administer most of the conventional loans in the U.S., charge
loan-level price adjustments, or LLPAs.

These fees are based
on two loan factors:

  • Loan-to-value (LTV): the ratio between the loan
    amount and home value
  • Credit score

As LTV rises and credit score
falls, the fee goes up.

For instance, a borrower with
20% down and a 700 credit score will pay 1.25% of the loan amount in LLPAs.

An applicant with a 640 score
and ten percent down will be charged a fee of 2.75%.

The majority of lenders will
require homeowners to have a minimum credit score of 620 in order to qualify
for a conventional loan.

While conventional loans are available
to lower credit applicants, the fees could make FHA much cheaper for those with
credit scores on the low end of the spectrum.

Verify your conventional loan eligibility (Sep 16th, 2020)

5. Freddie Mac Home Possible: Minimum
credit score 620

Released in March 2015,
Freddie Mac’s first time home buyer program, Home Possible®, is helping buyers
get into homes at a very low down payment.

Home Possible® is available for low and moderate-income borrowers and allows for a down payment of just 3%.

To qualify for the Home Possible® loan with reduced PMI rates, most lenders will require a 620 or better credit score.

Verify your Home Possible loan eligibility (Sep 16th, 2020)

6. Fannie Mae HomeReady: Minimum credit score 620

Released in December 2015, HomeReady is a great Fannie Mae loan program for low- to moderate-income borrowers, with expanded eligibility for financing homes in low-income communities.

Unlike Freddie’s Home Possible program, you don’t have to be a first-time homebuyer to qualify for HomeReady.

In addition to the low down payment option of just 3%, one of the most appealing traits of the HomeReady program is that it allows non-borrower household member’s income, regardless of their credit scores.

Most lenders require a minimum of 620 in order to qualify for HomeReady.

Verify your HomeReady loan eligibility (Sep 16th, 2020)

7. Non-qualified mortgage (Non-QM): Minimum credit score 500-580

The qualified mortgage rule,
also known as the QM Rule, went into effect in 2014.

The requirements associated
with QM loans were set forth by the federal government, and were meant to
create safer loans by prohibiting or limiting certain high-risk mortgage
products.

This rule is the reason most loans
require a minimum credit score in the 600s as well as a down payment and/or
mortgage insurance.

But there are still some “non-QM”
loans available that have more flexible rules.  

When banks don’t sell their mortgages to investors, they’re free to set their own requirements — like a lower credit score.

Thus, some non-QM loans can be found with credit scores as low as 500. But like with an FHA loan, you’re much more likely to find a lender who will approve you with a FICO score of 580 or higher.

If you’re looking for one of these loans, check out the specialty mortgage programs some banks offer that are neither conventional loans nor government-backed.

Or, work with a mortgage broker who
can recommend products from various lenders that might fit your needs.

What are today’s mortgage rates?

Even if you have a lower
credit score, you can still get a very low rate and payment in the current
interest rate market.

Check your eligibility for one
of today’s credit-friendly mortgage programs.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

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Mortgage and refinance rates today, September 14, 2020

Today’s mortgage and refinance rates 

Average mortgage rates nudged lower last Friday. So they remain within the uberlow range and within striking distance of the all-time low. Conventional loans today start at 2.75% (2.75% APR) for a 30-year, fixed-rate mortgage. 

Find and lock a low rate (Sep 16th, 2020)

Current mortgage and refinance rates 

Program Rate APR* Change
Conventional 30 yr Fixed 2.75 2.75 Unchanged
Conventional 15 yr Fixed 2.625 2.625 Unchanged
Conventional 5 yr ARM 3.625 3.006 Unchanged
30 year fixed FHA 2.25 3.226 Unchanged
15 year fixed FHA 2.25 3.191 Unchanged
5 year ARM FHA 2.5 3.258 Unchanged
30 year fixed VA 2.25 2.421 Unchanged
15 year fixed VA 2.25 2.571 Unchanged
5 year ARM VA 2.5 2.44 Unchanged
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Sep 16th, 2020)


Last week, we slimmed down this daily article to make it easier for you to read. But we transferred much of the detail to a new stand-alone article:

COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

If you were to choose to lock your rate today, nobody could blame you. These rates start out this morning at the last month’s fourth-lowest level, not far off the record low. So you’re bound to get one of the best deals in history. Better yet, you eliminate the danger of some momentous, unexpected event pushing rates sharply higher.

And that danger is always there. However, it currently seems less likely to be a problem than is often the case. The Federal Reserve has spent $1 trillion keeping mortgage rates low and pushing them lower. And it’s continuing to spend billions to achieve that.

Meanwhile, economists, analysts and some investors are increasingly worried about the sustainability of the economic rebound. And a bad economy is good for mortgage rates.

So there’s a good chance you could make modest gains if you continue to float your rate. What you choose to do is more down to your personal tolerance for risk that wider externals.

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

Compare top refinance lenders

Market data affecting today’s mortgage rates 

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time last Friday morning, were:

  • The yield on 10-year Treasurys fell to 0.65% from 0.68%. (Good for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were higher. (Bad for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices nudged lower to $36.93 from $37.16. (Neutral for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices edged up to $1,965 an ounce from $1,959. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
  •  CNN Business Fear & Greed index inched higher to 62 from 61 out of a possible 100 points. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

The Fed’s role in keeping mortgage rates low is welcome. But it dilutes the influence of markets. And you can no longer look at the above figures and draw firm conclusions about what they mean for those rates.

So use markets only as a rough guide. They have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. Today they’re looking OK for mortgage rates as investors look forward to an important Fed policy meeting and retail sales figures later this week.

Find and lock a low rate (Sep 16th, 2020)

Important notes on today’s mortgage rates

Here are some things you need to know:

  1. The Fed’s ongoing interventions in the mortgage market ($1 trillion and counting) should put continuing downward pressure on these rates. But it can’t work miracles all the time. So expect short-term rises as well as falls. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand that aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. At times of high demand, lenders can push up rates as a way of managing their workflow. Neither markets nor the Fed can help when that happens

So there’s a lot going on here. And nobody can claim to know with certainty what’s going to happen to mortgage rates in coming hours, days, weeks or months. But check out what 10 experts think could happen between now and the end of this year:

Are mortgage and refinance rates rising or falling?

Over the last few months, the overall trend for mortgage rates has clearly been downward. A new all-time low was set early in August and another looked possible a couple of weeks ago — before better-than-expected employment data snatched that possibility away. Still, a new one remains tantalizingly close.

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

Expert mortgage rate forecasts

And here are their current rates forecasts for the last two quarters of 2020 (Q3/20 and Q4/20) and the first two of 2021 (Q1/21 and Q2/21).

Note that Fannie’s and the MBA’s are updated monthly while Freddie’s are published quarterly So Freddie’s sometimes feel stale. The numbers in the table below are for 30-year, fixed-rate mortgages:

Forecaster Q3/20 Q4/20 Q1/21 Q2/21
Fannie Mae 3.0% 2.9% 2.8% 2.7%
Freddie Mac 3.3% 3.3% 3.2% 3.2%
MBA 3.0% 3.1% 3.1% 3.1%

So expectations vary considerably. You pays yer money …

Find your lowest rate today

According to federal regulator the Consumer Financial Protection Bureau, shopping around for your new mortgage or refinance is important. You could save thousands over just a few years by getting quotes from multiple lenders.

But you’ve rarely had more to gain by shopping around than you do now. The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. Worse, some are making it harder to get any mortgage at all if you want a cash-out refinance, a loan for an investment property, a jumbo loan or if your credit score is damaged.

So shopping around could get you the loan you want — and save you a bundle.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

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Should climate change dictate where you buy a house?


Add “climate change” to your home buying checklist

It’s no longer possible to ignore the effects of climate change.

With wildfires, hurricanes, and other disasters threatening homes — especially along the coasts — it’s an issue at the forefront for homeowners.

But there’s still some uncertainty about home buying and climate change.

Are weather patterns still a secondary consideration? Or is it time to pick up and move to a safer region altogether?

Naturally, the answer will be different for everyone. But knowing the facts can help you make a more informed decision about where to buy.

We looked into the most- and least-at-risk areas to buy a house in the era of climate change and asked real estate experts for their advice.

Here’s what we learned.

Verify your home buying eligibility (Sep 16th, 2020)


In this article (Skip to…)


Where is climate change already impacting real estate?

A recent Redfin survey showed that most Americans are thinking about climate change when they decide to buy or sell a house. But some are much more worried about its impact than others.

The highest concentrations of home buyers and sellers “very concerned” about the environment were in:

  • Houston, TX (58%)
  • New York City, NY (47%)
  • Miami, FL (46%)
  • Austin, TX (44%)
  • Los Angeles, CA (43%)
  • San Francisco, CA (41%)
  • South Carolina (40%)

This shouldn’t come as a surprise. Most areas where people are “very concerned” are more vulnerable to the effects of climate change.

Climate change map: Natural disasters in the U.S. over 100 years

This map from the McHarg Center’s Atlas for a Green New Deal shows where some of the most severe environmental disasters have struck the U.S. in the past century.

Map showing severe US environmental disasters in recent history from the McHard Center Atlas for a Green New Deal

Source: The McHarg Center

As The McHarg Center says, “With climate change, the number, frequency, and intensity of these events is likely to increase.”

So it makes sense that home buyers and sellers in those areas are considering climate change at the forefront.

But as its effects become more widespread, more home buyers will have to make climate change a primary consideration.

Climate change map: U.S. environmental risks by region

Climate change will impact each area of the U.S. differently.

Though it’s hard to answer the question of how much each region will be affected, scientists have a good idea of how climate change will strike.

Climate change map shows which areas of the US will be affected by which natural disasters

Wildfires Earthquakes Floods Hurricanes

Source: The McHarg Center

A second map from The McHarg Center shows how different parts of the U.S. are likely to be affected by climate change; from wildfires to earthquakes, floods, and hurricanes.

Some homeowners have already felt its impacts, especially those affected by wildfires on the West Coast and hurricanes in the Southeast.

But so far, it hasn’t been enough to make most home buyers retreat to higher ground.

Homeowners are worried, but not moving yet

Nearly three in four home buyers and sellers say the intensity or frequency of natural disasters impacts their choice about where and whether to sell or purchase a home.

In fact, only 10% of home buyers said climate change doesn’t affect their decision-making process whatsoever.

Chart shows 73% of people are concerned about climate change when deciding where to purchase a home

Source: Redfin

But those worries haven’t led major changes to home prices or buying habits.

In the report, Redfin chief economist Daryl Fairweather said:

“Climate change is important to house hunters, but when it actually comes time to decide where to buy a home, it’s outweighed by other factors that feel more immediate, like affordability and access to jobs.”

“Climate change… [is] outweighed by other factors that feel more immediate, like affordability and access to jobs.” –Daryl Fairweather, Chief Economist, Redfin

“Environmental changes may be factoring into their thought processes, but not yet into their actions,” Fairweather continues.

But the effects of climate change are getting notably stronger each year, with wildfires, hurricanes, and warmer temperatures taking a bigger toll on the U.S.

With that in mind, do you need to think more seriously about climate change when you buy a house? Would it be worth even moving to a new city or state?

Home buying tips in the time of climate change

Of course, not everyone will make a home buying decision based on climate change.

Many people love the area they live in, and are willing to adapt rather than move.

But if you’re in a particularly at-risk area (say, one below sea-level) you might be considering a big move more seriously.

Either way, there are a few tips you can follow to make a better long-term home buying decision. According to the experts:

  • Vet the area carefully. Perform a Google search of the market’s name along with “climate vulnerability assessment” to yield key research. “Find out how well the area is set up to handle emergency situations,” says Rick Sharga, president and CEO of CJ Patrick Company. . “In a natural disaster, are there enough roads to allow residents to evacuate? Are local first responder services adequate to provide relief? How far away are hospitals and other medical facilities?”
  • Learn if the city/state has a Climate Action Plan and what those plans are
  • Determine the cost and level of homeowners insurance protection you’ll need, including separate flood insurance (if needed). “Remember that insurance costs to cover flood, fire, and other natural disaster damages are likely to increase in areas facing increased climate change risks,” notes Phil Georgiades with FedHome Loan Centers
  • Assess if the home can withstand different natural disasters. “If not, determine whether it can be renovated to make it safer,” Sharga adds. “Factor that into your purchase price”

That last piece of advice can be especially useful if you’re buying in an area at high risk for natural disasters. 

It’s not just the location that matters — the home and its features make a big difference too.

By factoring safety features and necessary upgrades into your budget, you can make a home buying decision that offers more security (both physically and financially) in the long run.

Safer markets to consider when you buy a house

So what areas of the country could be safer for home buyers in light of climate change?

Different experts offer different advice.

But some metros and areas are consistently recommended as being possibly less affected by climate change and the natural disasters it can cause.

According to a survey or real estate professionals by BusinessInsider, these cities and their directly surrounding areas are at the top of the list:

  • Tulsa, OK — Safer from sea-level rise
  • Hartford, CT — Safer from sea-level rise
  • Boulder, CO — Self-sufficient water supply
  • Minneapolis/Saint Paul, MN — Sheltered from hurricanes and floods
  • Charlotte, NC — Safer from hurricanes in the south
  • Pittsburgh, PA — Less extreme cold

A paper published by researchers in 2016 also included the Upper Peninsula of Michigan; Seattle, WA; Northern Minnesota; and Portland, Oregon.

It suggested these areas could experience more moderate weather patterns and temperatures in the coming years that could make them safer havens in the era of climate change.

A Popular Science study also predicted that the West will continue to warm up and dry out, with wildfires expanding over larger areas and western states getting hotter by 6.5 degrees.

Climate change map: U.S. temperature changes

Some areas of the U.S. have already warmed considerably — by up to 5 degrees Fahrenheit over the past 120 years.

Map shows where U.S. temperatures have already risen by up to 5 degrees Fahrenheit due to Climate Change

Image: Washington Press. Data: NOAA

These temperature changes will become more extreme in the coming years. This leads to more extreme weather risks in those same areas.

Insights from real estate experts

Sharga says the most obvious climate-related factors for home buyers to think about are areas prone to flooding and hurricanes.

“In addition to areas historically considered as flood zones, there’s reason to be concerned about coastal properties flooding, as sea levels continue to rise,” says Sharga.

“This includes coastal areas in the Southeast and extends along the Gulf Coast—impacting buyers in states like Alabama, Louisiana, and Texas.”

The most obvious climate-related factors for home buyers to think about are areas prone to flooding and hurricanes.

Also, buyers in the Western and Southwestern regions — including California, Arizona, and Colorado —need to pay close attention to areas prone to wildfires, Sharga adds.

Keith Baker is the Mortgage Banking Program coordinator and faculty at North Lake College. He says he’d consider relocating to areas like Boston, Massachusetts; Madison, Wisconsin; Denver, Colorado; and Minneapolis, Minnesota.

“Think about moving to areas where it is cooler now. Consider that temperatures are expected to rise an average of 6 degrees hotter in the middle of North America,” suggests Baker.

“Aim for higher ground areas, as some elevation can be helpful both for beating the heat and escaping flooding.” –Keith Baker, Mortgage Banking Program, North Lake College

“Aim for higher ground areas, as some elevation can be helpful both for beating the heat and escaping flooding. And live away from the coast, which will experience an eroded and shrunken coastline.”

Suzanne Hollander is a real estate attorney and Florida International University senior instructor. She advises using good common sense before buying in an area already known for natural disasters.

“In Florida, there’s always
going to be risks for hurricanes and storm damage. In areas below sea level,
you’re going to have to worry about flooding. In Tennessee, we just witnessed
horrific tornadoes,” she says.

Climate change resources for home buyers

There are plenty of studies and interactive maps showing how climate change will affect particular regions, states, and cities in the U.S.

These can be great resources for potential homebuyers looking to make a safe investment.

The bottom line is that the effects of climate change are already here.

Many people will still be willing to buy in riskier areas, thanks to their other benefits — like beaches, forests, and waterways.

But making a strategic decision about the location and features of your home will be crucial to your safety and your investment in the long run.

So do your research, talk to real estate professionals in the area where you hope to buy, and be sure to balance your location desires with the risks they may present.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

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New Fed policy could mean years of low mortgage rates

Editor’s note: This article was originally published on September 1, 2020, and updated on September 15


Fed policy to help keep mortgage rates low

On August 25, Federal Reserve Chair Jerome H. Powell made an important speech that should be good news for borrowers and mortgage rates.

The FOMC meeting on September 15-16 should help clarify how the Fed’s new vision will play out.

Below, we’ll explain what it likely means for mortgage borrowers: continued low interest rates for years to come.

Get today’s rates. Start here (Sep 16th, 2020)

Will the Federal Reserve lower rates again?

The fed funds rate is already sitting near zero (technically, it’s at 0-0.25%). That’s about as low as the Fed can drop it without diving into negative interest rate territory.

In past statements, Fed chair Jerome Powell has made it clear the Fed doesn’t plan to broach negative rates in the foreseeable future.

So borrowers shouldn’t expect a drop in the fed funds rate — or rates directly tied to it, like credit cards, auto loans, and HELOCs.

But the good news is, we can likely expect rates to stay at their current low levels for quite a while. Here’s why.

New Fed policies mean continued low interest rates

In effect, the Fed has signaled that it won’t be tightening monetary policy for a long time, because economic recovery will be so uncertain post-COVID.

So interest rates are likely to stay low, probably for years.

And that should apply to mortgage rates, too.

As The New York Times put it in a recent article: “That could translate into long periods of cheap mortgages and business loans that foster strong demand and a solid job market.”

This does not mean rates are going to plummet; current home buyers and refinancers shouldn’t be affected too much.

But those looking to buy a house or refinance in the coming months and years should have low rates to look forward to.

Find and lock a low rate (Sep 16th, 2020)

What the Federal Reserve (normally) does

For a very long time, the Fed has had two main policy goals:

  1. To keep the inflation rate at an average of 2% per year
  2. To keep employment high and unemployment low

And you can see it’s generally done a pretty good job. The following graphs for the 21st century were retrieved from FRED, the Federal Reserve Bank of St. Louis:

Employment could be key to mortgage rates
U.S. Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis
Inflation, too, plays an important part in determining mortgage rates
World Bank, Inflation, consumer prices for the United States, retrieved from FRED, Federal Reserve Bank of St. Louis

Yes, there were a few spikes and troughs, most notably in response to recessions (the periods shaded in gray). But there’s been nothing out of control. Until 2020.

Now, look at the unprecedented spike in unemployment at the far right of the top graph. It shot up to 14.7% earlier this year.

Yes, unemployment is coming down. But the unemployment rate in July 2020 was still 10.2%, which translates into more than 16 million people without jobs.

And we’re far from a guaranteed recovery after COVID — or even a guarantee that the pandemic could be close to its end.

With such a sharp change in the economy, and so much uncertainty about how long it will continue, the Federal Reserve has had to tweak its policies in order to meet those pillars of 2% inflation and high employment.

How Federal Reserve policy changed in response to COVID

Clearly, some special action was needed to address unemployment.

So Powell and his colleagues on the Fed’s top policy committee (the Federal Open Market Committee or FOMC) came up with a fresh approach outlined in their new “Statement on Longer-Run Goals and Monetary Policy Strategy“.

Essentially, that involved rebalancing the Fed’s priorities.

Inflation policy

Instead of regarding employment and inflation as equally important, it would for now work to stimulate job creation even if that meant giving inflation a slightly freer rein.

In his speech, Powell said:

“In seeking to achieve inflation that averages 2 percent over time, we are not tying ourselves to a particular mathematical formula that defines the average. Thus, our approach could be viewed as a flexible form of average inflation targeting.”

Employment policy

And the Fed made a second change. Powell went on to say “the Committee did not set a numerical objective for maximum employment.”

So the Federal Reserve can continue to support employment growth, even when employment levels are high (and conversely, unemployment levels low).

In other words, it expects to be implementing economic stimulus policies for a long time to come.

Powell put it thus: “employment can run at or above real-time estimates of its maximum level without causing concern, unless accompanied by signs of unwanted increases in inflation.”

Impact on interest rates

To the average ear, the Fed’s new policies might sound too nuanced to have much of an effect.

As former Federal Reserve chair Janet Yellen said on Aug. 27:

“It seems like a pretty subtle shift to most normal human beings. But most of the Fed’s history has revolved around keeping inflation under control.”

New policies mean the Federal Reserve’s target interest rate could stay the same or move lower even as the economy begins to improve.

“This really does reflect a decisive recognition that we’re in a very different environment,” Yellen says.

Markets and investors were quick to pick up on the meaning behind Powell’s statement. They recognized it as a very significant change.

That’s because it means the fed funds rate (the target interest rate) will likely stay the same (near zero) even if inflation rises over the 2% mark or the employment market runs hot.

But the Fed doesn’t set mortgage rates, right?

Every time the Federal Reserve announces a change in its interest rates, loan officers and mortgage brokers are bombarded with calls from borrowers asking what that means for their mortgage rates.

The standard reply is, “Nothing. The Fed doesn’t determine mortgage rates.”

And they’re quite right. Changes to the Fed Funds rate directly affect a whole lot of loan products, but not mortgages (except for existing adjustable-rate mortgages (ARMs)).

How mortgage rates are determined

Mortgage rates are determined by supply and demand in a ‘secondary market,’ where mortgage-backed securities (bundles of mortgage interest) are traded. And, normally, the Fed gets no say in that market.

The Fed has had a bigger impact on mortgage rates recently, because it’s been buying mortgage-backed securities itself. But that’s a temporary intervention and a distraction from normal principles.

However, Federal Reserve policy changes do affect the overall mood of the market. And that can have an indirect effect on mortgage rates.

What the Fed’s change means for mortgage rates

Within a couple of days of Powell’s speech, at least one lender was advertising, “Fed stimulus cuts mortgage rates — Fed stimulus pushes mortgage rates to insane lows.”

It’s not clear whether that referred directly to the latest announcement, or to the organization’s earlier actions.

But it reflects a general feeling that the latest news out of the Fed is good for mortgage and refinance rates.

Those in the process of buying or refinancing should not wait to lock a rate. Mortgage rates are already near record lows and not expected to drop much further.

However, it does not mean that those who are in the process of buying or refinancing should wait for rates to fall before they lock.

Average mortgage rates have only inched down since Powell’s speech. And they’re already near record lows — so borrowers shouldn’t expect drastically lower rates thanks to the Fed’s action.

Rather, Powell’s announcement should be seen as good news for those who want to buy or refinance in the future, because rates are likely to stay at or near their current levels for quite some time.

Long-term dangers

And there are those who fear the long-term consequences for mortgage rates.

Writing for Mortgage News Daily, industry guru Matthew Graham warns of the dangers of the Fed taking its eye off the inflation ball: “High inflation is bad for low rates. It also connotes a higher comparative level of economic activity and employment. Those things are also not good for rates.”

And he’s right. The last thing investors want is to be stuck with a load of fixed-rate, low-yield, mortgage-backed securities during a time of high inflation. They inevitably lose money.

Lower mortgage rates still the likely outcome

But, for now, those investors have a lot more to be worried about than possible future inflation. And few expect either inflation or employment to reach worrying levels for years.

So it looks likely that the consensus view that Powell’s speech will be good for mortgage rates will hold true for the time being. Let’s hope that time ends up being several years.

Your next steps

If you’re already in the process of buying or refinancing, the Fed’s recent announcement shouldn’t affect you too much.

Rates are already ultra-low and not likely to plummet based on Powell’s statement. So there’s no real reason to wait on locking.

But if you’re planning to buy a home or refinance somewhere down the line, take heart. It seems like newsworthy rates aren’t going away any time soon.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

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