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2020 Mortgage Rate Predictions: Expect Flat to Better

2020 calculator

As 2019 wraps up, it’s time once again to consider what the future holds for mortgage rates.

Looking back over the past 12 months, it was another great year for anyone looking to buy a home or refinance, at least with regard to interest rates.

Sure, home prices aren’t on sale anymore, nor have they been for a long time, but financing remains dirt cheap, which is a big help for anyone struggling with affordability.

While most pundits expected rates to rise throughout 2019 (I said mostly flat, but was still wrong), they once again defied expectations and sank back near all-time lows.

Now let’s take a look at the freshest 2020 mortgage rate predictions from some industry heavyweights.

MBA 2020 Mortgage Rate Forecast

As always, we’ll start with the Mortgage Bankers Association first. Last year, they expected the 30-year fixed mortgage to hit 5% by the third quarter.

Instead, it fell to around 3.5% at that time, which was way off the mark. But they weren’t the only ones to get it wrong. Most predictions proved to be incorrect, just like in prior years.

That being said, this is what their 2020 forecast looks like on a quarterly basis:

First quarter 2020: 3.7%
Second quarter 2020: 3.7%
Third quarter 2020: 3.7%

Fourth quarter 2020: 3.7%

This year they’re playing it a lot safer and just going with a 3.7% average for the 30-year fixed all year long. Yep, all year long. Great news for anyone looking for a home loan.

Fannie Mae 2020 Mortgage Rate Forecast

Then we’ve got Fannie Mae, the biggest buyer and backer of home loans in the United States. They weigh in on rates every month via their housing forecast as well.

In 2019, they got it wrong too, going with 4.8% across the board the entire year. We know now that rates moved in the opposite direction.

This year, they’re going with a different approach, predicting slightly lower rates, as opposed to slightly higher rates. Hopefully they’ll be right this time!

Fannie expects the following:

First quarter 2020: 3.6%
Second quarter 2020: 3.6%
Third quarter 2020: 3.6%
Fourth quarter 2020: 3.5%

If their prediction holds true, home buyers and homeowners looking to refinance will enjoy mortgage rates near all-time lows.

Freddie Mac 2020 Mortgage Rate Forecast

Brother Freddie Mac is the mortgage rate guru of the bunch, having released their weekly mortgage rate survey since 1971.

Of course, those are real quoted rates from mortgage lenders nationwide, which may differ from their own forecast.

Last year, Freddie predicted a 30-year fixed as high as 5.3%, matching the National Association of Realtors for biggest whiff.

It appears they’re playing it more conservatively this time around, as evidenced by their mortgage rate predictions for 2020:

First quarter 2020: 3.8%
Second quarter 2020: 3.8%
Third quarter 2020: 3.8%
Fourth quarter 2020: 3.8%

Like the MBA, Freddie Mac is forecasting completely flat mortgage rates for 2020, with the 30-year fixed pegged at 3.8%, very near current levels.

NAR 2020 Mortgage Rate Forecast

Next up is the National Association of Realtors, notorious for forecasting higher mortgage rates to scare you into buying a home today!

Okay, maybe that was a hair harsh, but they do tend to predict higher as opposed to lower rates, and generally win the prize for highest rate prediction year in and year out.

That was true of 2019, when they expected the 30-year fixed to finish the year at 5.3%, nowhere near the 3.73% it averaged this week. But to be fair, everyone else anticipated similar.

Here is their 2020 mortgage rate projection, per their latest U.S. Economic Outlook:

First quarter 2020: 3.7%
Second quarter 2020: 3.7%
Third quarter 2020: 3.8%
Fourth quarter 2020: 3.8%

Like the rest of the bunch, they’re staying pretty neutral, though they couldn’t help themselves and had to forecast rates 10 basis points higher by December 2020.

My Mortgage Rate Prediction for 2020

I mostly agree that mortgage rates will be flat in 2020, though as I mentioned last time around, there will always be opportunities throughout the year.

In other words, keep an eye out for favorable swings as hot-button issues like the U.S. presidential election, impeachment, trade war, Brexit, and other geopolitical events take hold.

If things get haywire, which with the above list wouldn’t be a surprise, mortgage rates may dip closer to all-time lows again, or even break new records.

Of course, such movements might be short-lived and erratic in nature, so you’ll have to pounce and lock your rate if given the opportunity.

All in all, I’d say we’re experiencing a new normal for 30-year fixed mortgage rates.

Instead of averaging 5-6% year after year, they’re holding steady in the 3.5%-4.5% range. And nobody can complain about that.

Update: 2023 Mortgage Rate Predictions

(photo: Marco Verch)

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