2018 Mortgage Rate Forecast: Overall It’s Looking Pretty Good

December 13, 2017 No Comments »
2018 Mortgage Rate Forecast: Overall It’s Looking Pretty Good

It’s that time of the year again, when we take a look at what’s in store for mortgage rates the following year. So without further ado, here is the “2018 mortgage rate forecast” from a variety of different housing and mortgage groups.

2018 Mortgage Rate Forecast from the MBA

We’ll start with the Mortgage Bankers Association, which releases a monthly Mortgage Finance Forecast. In their latest release, they predict where 30-year fixed mortgage rates will go next year and even in 2019 and 2020.

Here’s how they see 2018 shaping up, broken down by quarter:

First quarter 2018: 4.3%
Second quarter 2018: 4.5%
Third quarter 2018: 4.7%
Fourth quarter 2018: 4.8%

All in all, it doesn’t look so bad, though a slow creep from the current ~4% rate to the high-4s could dent some wallets pretty good.

And in 2019, they see rates rising to 4.9%, just shy of that all-too-scary 5% threshold. Don’t ask what they think will happen in 2020. Fine, I’ll tell you, we’re looking at a rate of 5.3%. Yikes!

2018 Mortgage Rate Forecast from Fannie Mae

While the MBA’s estimate certainly didn’t put us at ease, maybe Fannie Mae’s forecast will be a little rosier. Let’s find out.

First quarter 2018: 4.0%
Second quarter 2018: 4.1%
Third quarter 2018: 4.1%
Fourth quarter 2018: 4.2%

That’s more like it! You gotta love Fannie Mae – they never seem to get too worked up when making their mortgage rate predictions, and 2018 is no different.

In fact, they barely expect mortgage rates to budge next year, with perhaps only a quarter-percent rise throughout the year.

Amazingly, their forecast for 2018 is lower than their 2017 predictions, which had called for rates as high as 4.3%.

In 2019, they’re still playing it cool with relatively flat rates and only a slight rise to 4.3% by that December.

For the record, they’ve nailed it two years in a row, so they might be the horse to go with in 2018 as well. If they’re right again, it’ll be more good news for both prospective and existing homeowners.

2018 Mortgage Rate Forecast from Freddie Mac

Now let’s take a look at brother Freddie Mac’s forecast, which you might want to pay close attention to seeing that they release the bellwether mortgage rate survey every week.

First quarter 2018: 4.1%
Second quarter 2018: 4.3%
Third quarter 2018: 4.4%
Fourth quarter 2018: 4.6%

Okay Freddie Mac, we can deal with that. A mere 10-basis point climb in the first quarter, followed by similarly reasonable increases in subsequent quarters. Yeah, that probably works for most folks.

A 4.6% rate at the end of 2018 certainly isn’t something to get upset about. As for 2019, you’re looking at a still decent 4.7% 30-year fixed rate.

2018 Mortgage Rate Forecast from the NAR

First quarter 2018: 4.2%
Second quarter 2018: 4.5%
Third quarter 2018: TBD
Fourth quarter 2018: TBD

Then there’s the National Association of Realtors, a group that always seems to fear for the worst. I don’t think they’ve ever predicted things to just remain where they are. They seem to sell urgency, which is important when you’re trying to get people into homes.

Anyway, I don’t have their full quarterly breakdown yet, just Q1 and Q2, as seen above.

But I also have a tidbit from chief economist Lawrence Yun who said recently in a release that “mortgage rates will gradually climb towards 4.50 percent by the end of 2018.”

Last year, they expected the 30-year fixed to climb to 4.6% by the end of 2017, which as you may know, hasn’t transpired.

They seem to make some comparatively loose predictions, often going with whatever the next highest threshold is, though they’ve backed away from their near-5% estimate held in 2016.

My point is it seems more psychological than it is scientific, and perhaps that’s a good thing if you want rates to stay in the 4% realm.

2018 Mortgage Rate Forecast from Zillow

zillow mortgage forecast

We’ve also got a prediction from Zillow, which recently surveyed some 100 housing experts, market strategists, and economists about mortgage rates in 2018 (among other things).

That survey’s median prediction is 4.50% on the 30-year fixed, with a low-end prediction (25th percentile) of 4.28% and a high-end prediction (75th percentile) of 4.70%.

Depending on who’s right, if anyone, rates could move as little as a quarter of a percent to nearly a point higher next year.

I also stumbled upon the National Association of Home Builders (NAHB) interest rate forecast, which sees the 30-year fixed rising to 4.20% next year and 4.67% in 2019.

The chart below from CoreLogic is an average of all those forecasts, which points to a rate of 4.6% by December 2018. The more pessimistic MBA forecast might be pushing it higher.

2018 rate chart

In summary, 2018 is looking like it’ll go easy on mortgage rates, assuming the consensus is correct. Of course, anything can happen and the general trend seems to be higher rather than lower.

But if any rate movement remains muted, it should help buyers contend with rising home prices, and also keep mortgage refinancing incentives alive for those looking to save on their existing mortgages.

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