Mortgage Rate Forecast for 2019 – 2020: A Modest Rise Ahead?

A recently issued mortgage rate forecast for 2019 and 2020 suggests that average rates could hover below 5% for the foreseeable future.

That forecast was issued by the economic research team at Freddie Mac, the same organization that publishes a widely cited mortgage industry survey. The group predicted that 30-year loan rates could end up averaging 4.6% in 2019, and 4.9% in 2020.

Where We Are Right Now

As of February 28, the average rate for a 30-year fixed mortgage loan was 4.35%. That was based on the long-running weekly survey conducted by Freddie Mac.That’s the lowest it has been in over a year. Mortgage rates have been following a steady decline since November of this year.

The chart below (provided by Freddie Mac) shows average 30-year mortgage rates during the 12-month period from February 2018 to February 2019. This chart was published around the same time as the group’s long-range mortgage forecast.

Chart: Average 30-year mortgage rates. Source: Freddie Mac.

As you can see, rates fell sharply from late November 2018 to late February 2019. And that brings us up to where we are today, as of March 1.

These trends represent a great opportunity for borrowers who are planning to purchase or refinance a home in 2019. Home buyers, in particular, could capitalize on this by locking in a low rate for the long-term. This would essentially shield them from any mortgage rate increases that occur later in 2019, or beyond. That’s the primary advantage of using a fixed home loan.

Mortgage Rate Forecast for 2019 through 2020

Last month, economists and analysts from Freddie Mac issued an updated forecast for mortgage rates that extends through 2019 and into 2020.

By their estimation, the average rate for a 30-year fixed home loan will end up averaging 4.6% in 2019. (That’s about where it was last year, on average.) Over the horizon, they expect 30-year mortgage rates to average 4.9% in 2020.

Based on this particular forecast, it seems that economists do not expect to see a significant increase in home loan interest rates anytime soon. Or at least not a sustained increase.

Still, rates could rise gradually over the coming months, due to the overall strength of the economy and other contributing factors. There appears to be some consensus in this area as well. So a sense of urgency might be warranted, for those borrowers who plan to purchase or refinance in the near future.

A Strong Home Buying ‘Season’ in Spring 2019

The group’s February 28 report also stated the following: “The general decline in rates we have seen recently, combined with rebounding pending home sales, hint at a strong spring homebuying season.”

The Home Buying Institute expects the same. In fact, it doesn’t require a great deal of insight to make such a prediction. With mortgage rates sinking to near-record lows, we will likely see an increase in home-buying activity during the spring months.

According to the latest mortgage rate forecasts for 2019 – 2020, we probably won’t see a “spike” in home loan rates anytime soon. But they could inch upward over the coming months. Meanwhile, home prices continue to rise in most parts of the country.

So one could argue that it would be better to buy a home sooner, rather than later. Those who postpone their purchases until later in 2019 — or in 2020 — could encounter higher home prices and mortgage rates.

Other Predictions from the Report

In addition to their mortgage rate forecasts for 2019 and 2020, Freddie Mac’s research team shared a number of trends and predictions in their latest report.

Here are some highlights:

  • They predicted that the nation’s GDP growth will slow to a rate of 2.5% in 2019, followed by a rate of 1.8% in 2020.
  • They also expect the job market to continue firing on all cylinders. Their job-market forecast predicts that the U.S. unemployment rate will drop slightly to 3.6% in 2019.
  • As mentioned earlier, their forecast for 30-year fixed mortgage rates suggests that they’ll average around 4.6% in 2019. That would be on par with last year’s average. Over the horizon, they expect long-term mortgage rates to average 4.9% in 2020.
  • Freddie Mac’s economists are forecasting an uptick in home sales as well, partly due to the favorable interest rates we are seeing right now. They expect nationwide home sales to gain momentum in 2019, increasing to 6.1 million over the year.

Disclaimer: This article contains mortgage rate forecasts for 2019 and 2020. Those predictions were offered by third parties not associated with the Home Buying Institute. Economic and mortgage industry forecasts are the equivalent of an educated guess and should be treated as such.