Recent FHA mortgage rate predictions suggests that borrowers could encounter higher interest rates in 2018, compared to 2017. Additionally, the FHA loan limits for some counties might go up next year, due to significant home-price gains that have occurred over the last year or so.
Here are the latest FHA mortgage rate predictions and trends, as of fall 2017.
FHA Mortgage Rate Predictions Through 2018
The average rate for a 30-year fixed FHA home loan has been hovering below 4%, on average, for many weeks now (as of October 2017).
According to a report published by Freddie Mac on October 5, 2017, the average rate for a 30-year loan was 3.85%. That was a slight increase over the previous week’s average.
But the company’s latest round of predictions for FHA and conventional mortgage rates suggest that borrowers could see higher costs in 2018. Unlike other forecasts that offer monthly or quarterly predictions, the economist at Freddie Mac predict the average rate over an entire year. They are predicting that 30-year FHA and conventional mortgage rates will end up averaging 4.0% for 2017, and will average 4.4% in 2018.
In September, the Mortgage Bankers Association updated its long-range forecast for the U.S. economy and housing markets. Among other things, their report offers predictions for FHA loan rates and conventional mortgages from one quarter to the next. Here is their quarterly forecast for 30-year mortgage rate averages, extending into 2018:
- Q4, 2017 — 4.2%
- Q1, 2018 — 4.5%
- Q2, 2018 — 4.7%
- Q3, 2018 — 4.8%
- Q4, 2018 — 4.9%
Higher Loan Limits Are Possible in 2018
There are limits to how much you can borrow when using an FHA loan. Or, more specifically, there are limits to how much the government is willing to insure. These caps are aptly referred to as FHA “loan limits.”
These maximum amounts vary by county because they are based on median home prices, which also vary by location. Federal housing officials review the FHA loan limits each year, and raise them when necessary to keep pace with rising home values.
At the end of 2016, loan limits were increased for most counties across the country. This was in response to the significant home-price gains that occurred in many cities last year.
Housing officials might increase the FHA loan limits for 2018 as well, due to price increases that occurred in some areas. If this occurs, we expect that it will be on a county-specific basis. Counties that have experienced only moderate home-price growth could have the same loan limits next year as this year. On the other hand, housing markets that experienced significant price increases could get higher loan limits for 2018. We’ll know more in a couple of months.
Forecasts Are the Equivalent of an Educated Guess
Getting back to the FHA mortgage rate forecasts, it’s important to review them with a healthy level of skepticism. Forecasters such as Freddie Mac, the Mortgage Bankers Association, and others routinely make predictions for the housing market and mortgage rates. Sometimes they are fairly accurate, while other times they’re not.
For example, around this time last year, these same groups were making predictions that FHA and conventional loan rates would rise steadily throughout 2017. But that did not happen.
Instead, rates rose a bit during the first half of the year, and then dropped considerably over the summer and fall. As of the first week of October 2017, the average rate for a 30-year FHA loan is quite a bit lower than it was at the start of the year.
The point is, FHA mortgage rate predictions and forecasts give us some insight into what the experts are expecting. But you shouldn’t use them for financial planning purposes. They are the equivalent of an educated guess.
Disclaimer: This article contains forward-looking statements such as forecast and predictions. These were issued by third parties not associated with our company. We have gathered them here as an educational service to our readers. As a general rule, QualifiedMortgage.org does not make claims or predictions regarding mortgage rates.