Mortgage Rate Forecast for 2018: Just How Much Higher?

Latest Mortgage Rate Forecast

Although 2017 mortgage rates dropped toward the end of 2017, despite early predictions of an increase, 2018 started out with some relatively large increases.

Check out the latest mortgage rate forecasts for 30-year Fixed Rate Mortgages from Fannie Mae, Freddie Mac, and the MBA (Mortgage Bankers Association) for 2018, as published in early 2018. Note that the MBA has a more aggressive rate increase, going from 4.4% to 4.9%, Fannie Mae has a very small increase going from 4.2% to 4.9%

Source:

MBA: https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary

Freddie Mac:http://www.freddiemac.com/research/outlook/20170921_looking_ahead_to_2018.html

Fannie Mae:http://www.fanniemae.com/resources/file/research/emma/pdf/Housing_Forecast_012218.pdf

Mortgage Rate Forecasts: Are They Accurate?

Are mortgage rates going up? Or maybe down? Predicting mortgage rates, like most financial products, is very inaccurate. Mortgage rates are affected by many economic and political factors. Often, unexpected events cause a sudden change in direction.

Pretty much like predicting the weather, the farther in the future one tries to predict, the less accurate the prediction becomes.

January 2017 Mortgage Rate Predictions: When comparing two different predictions from January 2017, you can see that the MBA had predicted a gradual increase in mortgage rates during 2017. On the other hand, Fannie Mae predicted a very moderate increase and steady rates.

MBA Mortgage Rate Prediction

Fannie Mae Mortgage Rate Prediction

When looking at a longer period you can see that the differences between the two forecasts are much larger. Once again, the MBA sees a gradual increase through 2019 until mortgage rates reach 5.4%. Fannie Mae sees rates increasing very moderately, reaching 4.5% by the end of 2019. Looking at the differences between the two forecasts, it is clear that there is a lot of guesswork in mortgage rate forecasting.

Mortgage Rate Forecasts: Do They Matter?

Just why should you care about future mortgage rates?

Obviously, industry insiders care about mortgage rate movements, as do policymakers and economists.

However, If you are a regular consumer, the change of mortgage rates might affect your household decisions. Can you benefit from a mortgage refinance? Should you refinance now, or wait? Can you get rid of your Mortgage Insurance? Is this a good time to buy a home? Will future mortgage rates price you out of the market?

Although mortgage rate forecasting is not accurate, especially over a long-term, it can be helpful to keep track of mortgage rates and take advantage of financial products that can boost your overall financial situation.

If you are considering refinancing your mortgage or purchasing a home, mortgage rates make a big difference. For example, a 1% increase in interest rate, from 4% to 5%, on a $300,000 loan will mean paying $178 more per month and needing about $500 more in income to qualify based on a 36% debt to income ratio.