Mortgage rates forecast for August 2019
Mortgage rates are on the cusp of a new era, ushered in by a rare action by the Fed: a rate cut during an economic boom.
Typically, the Fed slashes rates in times of recession, as it did in 2008, which is the last time we saw any kind of cut at all.
For the first time in nearly 11 years, though, the Fed is expected to cut rates on July 31.
This could make August quite interesting for mortgage rates.
Already near 3-year lows, rates could drop even lower. But can they descend further than the ridiculously low 3.75% 30-year fixed that Freddie Mac is already reporting? Some think so.
This could be the opportunity that home buyers and refinancing home owners were waiting for.
Ready to capture one of history’s lowest rates? August could be your month.
Predictions for August
August will be a wild ride for mortgage rates. Market-moving news will leave rates different than they were in July. The only question is, will they be more or less advantageous for mortgage shoppers?
Forecasts for 2019 put rates somewhere around 4.4% by the end of the year. That’s down from forecasts earlier in the year that called for rates in the 5s.
The funny thing is, though, that rates have been dropping since late 2018. Now, it appears rate increases could be much more subdued than first thought, if rates increase at all.
Been looking for a good rate on a refinance or home purchase? Now might be the time to lock.
Mortgage agency Freddie Mac slashes its rate forecast for 2019-2020
Freddie Mac is one of the leading sources for rate forecasts in the U.S.
So when it cuts its rate prediction by 1%, consumers should pay attention.
As recently as late-2018, the agency predicted 30-year mortgage rates at 5.1% for 2019. The group just cut that prediction to 4.1%.
As a home buyer, it could mean buying four bedrooms instead of three, or selecting the neighborhood you really wanted.
What’s more, it foresees rates going up to just 4.2% in 2020.
This is significant. A 1% lower rate on a $350,000 mortgage translates to a savings of $200 per month. As a home buyer, it could mean buying four bedrooms instead of three, or selecting the neighborhood you really wanted.
As a refinance candidate, it means finally having breathing room in your monthly budget.
With current rates near 4%, and major agencies predicting they’ll stay that way, it makes sense to seriously consider a home purchase or refinance in the next few months.
August: First Fed rate cut since December 2008
The Federal reserve uses “levers” to adjust economic performance in the U.S. One of those levers is the federal funds rate.
It’s the rate at which banks can lend each other money, but it affects home equity lines, credit card rates, and even mortgage rates, although indirectly.
On July 31, the Fed is expected to cut rates for the first time since December 2008. Lackluster economic data has combined with pressure from President Trump to cut rates.
Now, the Fed will do something thought impossible earlier this year: provide stimulus to an already-hot economy, a pre-emptive strike to keep this bull run going.
The move could have profound effects for mortgage shoppers. It’s been nearly 11 years since the last rate cut and no one knows exactly what will happen this time.
It might usher in a new era for mortgage rate shoppers.
Rates are already in the high 3s according to Freddie Mac. Could they fall to the high 2s? No one knows, but one commentator is calling for the lowest rates ever.
Talk about paradigm shifts.
Just months ago, everyone was predicting rates in the 5s. That would have been a tough pill to swallow for refinance and home purchase candidates alike.
Just months ago, everyone was predicting rates in the 5s.
With rates in the 3s, and the possibility of even lower rates, a whole new world is opened up to those seeking home financing.
But should mortgage consumers wait until then to lock in a rate? No. Markets are forward-looking, so many believe that mortgage rates have already fallen to fresh lows in anticipation of the new Fed paradigm.
Will mortgage rates continue to drop?
It’s starting to look like a real possibility.
Some predictions are downright bold. Barry Habib, a well-known mortgage rate commentator, says mortgage rates will be “the lowest they’ve ever been” in the next 12 months. Yes, lower than the 3.31%, 30-year fixed average seen in 2012.
Should home buyers and refinancing homeowners hold on for such a rate? Well, keep in mind that most mortgage rate predictions are wrong. But if you’re 6-12 months out from buying a home, this should provide some encouragement.
Mortgage rate trends as predicted by housing authorities
Housing agencies nationwide are calling for rates in the low- to mid-4s for 2019.
|Agency||30-Yr Rate Prediction|
|National Association of Realtors||4.40%|
|National Association of Home Builders||4.46%|
|Mortgage Bankers Association||4.40%|
|Average of all agencies||4.38%|
To sum it up, everyone is predicting slightly higher rates. Today’s rate might be as good as we’ll see for years to come.
Advice for August 2019
Knowing what will happen in June is only half the battle. As a mortgage rate shopper, you need to know the best actions to take this month.
6 million homeowners could lower their mortgage rate by at least 0.75%
There’s some very exciting news from mortgage data firm Black Knight.
Their research shows that nearly six million homeowners could cut their current mortgage rate by 0.75% or more. The average savings, says the firm, is over $270 per month.
Most refinance candidates sat on the sidelines in 2018 because rates were just too high. Now, many people — even those who purchased their homes in 2018 — are eligible for a refinance and big monthly savings.
Rates are hitting fresh lows, and now could be the time to lock.
Buy before home prices rise
All this talk of free-falling rates has not gone unnoticed by new home buyers.
In 2018, buyers were sitting the fence. Now they are jumping off it in droves, running toward any available housing.
Rates are low. That makes previously unaffordables homes affordable, to the tune of $200 per month on a $350,000 mortgage, for every 1% rate drop.
In 2018, buyers were sitting the fence. Now they are jumping off it in droves.
But there’s a darker side to lower rates: rising home prices.
In the remainder of 2019 and into 2020, home prices are bound to rise and, bidding wars, to become more commonplace.
Fannie Mae released its latest Home Purchase Sentiment Index (HPSI), which indicated that 41% of consumers believe home prices will rise in the next 12 months, a 5-point bump from the previous month.
Renters should seriously consider capitalizing on today’s combination of ultra-low rates and still-reasonable home prices. A year from now, they might be glad they did.
Loan product rate updates
Many mortgage shoppers don’t realize there are many different types of rates. But this knowledge can help home buyers and refinancing households find the best value for their situation.
Following are updates for specific loan types and their corresponding rates.
Conventional loan rates
Conventional refinance rates and those for home purchases are still low despite recent increases.
According to loan software company Ellie Mae, the 30-year mortgage rate averaged 4.41% in June (the most recent data available).
This is higher than Freddie Mac’s 3.75% average because it factors in low credit and low-down-payment conventional loan closings, which tend to come with higher rates. Additionally, the most recent Ellie Mae report shows rate levels before they started dropping.
Lower credit score borrowers can use conventional loans, but these loans are more suited for those with decent credit and at least 3% down. Five percent down is preferable due to higher rates that come with lower down payments.
Twenty percent of equity is preferred when refinancing.
With adequate equity in the home, a conventional refinance can pay off any loan type. Got an Alt-A, subprime, or high-PMI loan? A conventional refi can take care of it.
For instance, say you purchased a home three years ago with an FHA loan at 3.5% down. Since then, home values have skyrocketed.
You refinance into a conventional loan (because you now have 20% equity) and eliminate FHA mortgage insurance.
This could be a savings of hundreds of dollars per month, even if your interest rate goes up.
FHA mortgage rates
FHA is currently the go-to program for home buyers who may not qualify for conventional loans.
The good news is that you will get a similar rate — or even lower one — with an FHA loan than you will with conventional.
Related: Read more about FHA costs and requirements on our FHA loan calculator page.
According to loan software company Ellie Mae, which processes more than 3 million loans per year, FHA loan rates averaged 4.49% in June (the most recent data available), while conventional loans averaged 4.41%.
Another interesting stat from Ellie Mae: About 30% of all FHA loans are issued to applicants with scores below 650.
FHA loans come with mortgage insurance. But the overall cost is not much more than for conventional loans.
A little-known program, called the FHA streamline refinance, lets you convert your current FHA loan into a new one at a lower rate if rates are now lower.
VA mortgage rates
Homeowners with a VA loan currently are eligible for the ever-popular VA streamline refinance.
No income, asset, or appraisal documentation is required.
If you’ve experienced a loss of income or diminished savings, a VA streamline can get you into a lower rate and better financial situation. This is true even when you wouldn’t qualify for a standard refinance.
But don’t overlook the VA loan for home buying. It requires zero down payment. That means if you have the cash for closing costs, or can get them paid for by the seller, you can buy a home without raising any additional funds.
Don’t overlook the VA loan for home buying. It requires zero down payment.
VA mortgages are offered by local and national lenders, not by the government directly.
This public-private partnership offers consumers the best of both worlds: strong government backing and the convenience and speed of a private company.
Most lenders will accept scores down to 620, or even lower. Plus, you don’t pay high interest rates for low scores.
Quite the contrary, VA loans come with the lowest rates of all loan types according to Ellie Mae. In June (the most recent data available), 30-year VA mortgage rates averaged just 4.20% while conventional loans averaged 4.41%, representing a big discount if you’re a veteran.
Check your monthly payment with this VA loan calculator.
There’s incredible value in VA loans.
USDA mortgage rates
Like FHA and VA, current USDA loan holders can refinance via a “streamlined” process.
With the USDA streamline refinance, you don’t need a new appraisal. You don’t even have to qualify using your current income. The lender will only make sure that you are still within USDA income limits.
Home buyers are also learning the benefits of the USDA loan program for home buying.
No down payment is required, and rates are ultra-low.
Home payments can be even lower than rent payments, as this USDA loan calculator shows.
Qualification is easier because the government wants to spur homeownership in rural areas. Home buyers might qualify even if they’ve been turned down for another loan type in the past.
Mortgage rates today
While a monthly mortgage rate forecast is helpful, it’s important to know that rates change daily.
You might get 3.9% today, and 4.0% tomorrow. Many factors alter the direction of current mortgage rates.
This month’s economic calendar
The next thirty days hold no shortage of market-moving news. In general, news that points to a strengthening economy could mean higher rates, while bad news can make rates drop.
- Tuesday, July 30: Fed meeting begins
- Wednesday, July 31: Fed meeting adjourns, rate announcement
- Friday, August 2: Nonfarm Payrolls, wages, unemployment rate
- Monday, August 5: ISM Services
- Tuesday, August 13: Consumer Price Index
- Thursday, August 15: Retail Sales
- Wednesday, August 21: Existing Home Sales
Now could be the time to lock in a rate in case these events push up rates this month.
What are today’s mortgage rates?
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