Mortgage Forecast: Here’s What Interest Rates Borrowers Can Expect to Get On Their Mortgage In 2020

Investments April 14, 2020

The future is unpredictable, financial markets much more so. The same also applies to mortgage interest rates. But while making exact predictions is certainly not easy, experts can still make educated guesses based on their observations of a variety of telling factors.

These can then be used as a guideline by both house hunters and homeowners who may be looking to apply for or refinance their mortgage. Here’s what financial experts have to say about the state of mortgage interest rates for the coming year.

Consistent Rates

The current mortgage rates today (3.625%) aren’t that much different from the predictions of various housing market experts for 2020 (3.6% to 3.7%)

The good news is that numerous real estate professionals, as well as housing organizations, agree that 30-year fixed-rate mortgage rates would continue to remain in the low levels until 2020 with a few only predicting a slight increase.

According to the Mortgage Bankers Association‘s mortgage forecast, the average rate for next year is 3.9%. For comparison, 2019 rates began at 4.51%. Meanwhile, Fannie Mae and Freddie Mac, state-sponsored loan companies, expect rates to stay between 3.6% to 3.7% for the entirety of the coming year. These figures aren’t too far off from the rates people can get at the moment.

Further supporting this are the similar forecasts of the National Association of Realtors and Redfin chief economist Daryl Fairweather at 3.6%. Fairweather says though that this could be only assumed given that the economy continues to grow.

Numerous Factors

Interest rates tend to rise when there are more people applying to borrow money from lenders

Still, it’s still important to remember how 30-year fixed-rate mortgage rates can change is as fast as a week considering factors like the current forces of supply and demand. For example, interest rates are likely to fall when mortgage providers find it easier to sell off their mortgages and mortgage-backed securities. Other factors that might affect rates are the strength of the housing market, the state of the stock market, and the risk of recession.

Meanwhile, capital markets trader Preetam Purohit has a slightly less optimistic prediction than his peers. He expects mortgage rates to hover between 3.75% to as high as 4.5% for 2020. Purohit also emphasized the potential impact of the current state of the relations between the economic giants China and the United States.

He says that the Federal Reserve is likely to make interest rate cuts at the event of a mild recession due to the potential worsening of the trade conflict between the two countries.

Best Course of Action

Those who plan on staying in their current home for a long time will find refinancing today beneficial because of the low rates

At the moment though, True Contrarian CEO Steven Jon Kaplan advises people to take advantage of the current low rates and refinance their home. According to him, rates won’t go significantly lower than they are now in the near future unless the country goes into a recession. The same advice can apply to those who are currently shopping for a home.