Mortgage Rate Forecasts for 2018: Predictions from the Experts

October 3, 2017 | By Brandon Cornett | © 2017, QualifiedMortgage.org | Our copyright policy

A recent round of mortgage rate forecasts for 2018 suggest that we could see steadily rising rates through the end of this year and into 2018. These predictions (covered below) were issued by economists and analysts with the Mortgage Bankers Association, Freddie Mac, and the personal finance company Kiplinger. Here’s an overview of their 2018 mortgage rate forecasts and projections.

Where We Are Right Now

According to the latest industry survey conducted by Freddie Mac, the average rate for a 30-year fixed home loan was hovering around 3.8%, at the start of October 2017.

As you can see from the chart below, the average rate for a 30-year fixed loan has mostly remained below 4% through the summer and early fall of 2017. It was at 3.83% as of October 3, when this article was published. So let’s use that a baseline, when viewing the 2018 mortgage rate forecasts that follow.

Rate chart October 2017
Mortgage rate trends through October 2017. Source: Freddie Mac

Rates have been fairly stable over the last few weeks ending in October 2017. You can see this in the chart above. But recent forecasts suggests they could rise over the coming months in response to actions taken by the Federal Reserve, economic growth, and other contributing factors.

Mortgage Rate Forecasts for 2018

Let’s start with the Mortgage Bankers Association (MBA). In September 2017, the industry group updated its long-range finance forecast that offers predictions for the U.S. economy and housing market. Among other things, this report included a mortgage rate forecast through 2018.

Here are their quarterly predictions for 30-year mortgage rates (on average):

  • Q4, 2017 — 4.2%
  • Q1, 2018 — 4.5%
  • Q2, 2018 — 4.7%
  • Q3, 2018 — 4.8%
  • Q4, 2018 — 4.9%

If this mortgage forecast proves to be accurate, it would represent a year-over-year increase of one full percentage point. That’s because 30-year loan rates are currently averaging around 3.8% (as of October 2017). Economists with the MBA expect those rates to rise to an average of 4.8% by the third quarter of next year.

This is one of the boldest forecasts we have read. While other expert sources are also predicting a rise in rates ahead, their projections are more moderate compared to those offered by the MBA.

For example, the market analysts at Kiplinger recently predicted that 30-year fixed mortgage rates would average around 4.3% during 2018. Here’s a quote from their September 2017 forecast:

“In 2018, look for the effects of the Fed’s short-term rate hikes and securities-purchase reductions to boost long rates by another 0.4 percentage points. The 10-year Treasury note rate should be 2.8% and the 30-year fixed mortgage rate, 4.3%.”

Lastly, we have a 2018 mortgage rate forecast offered by Freddie Mac, one of the two government-sponsored enterprises that buy home loans from lenders. Unlike the MBA’s outlook, which is broken down by quarter, Freddie Mac offers a forecast for the year as a whole. Their economists expect that 30-year mortgage rates will end up averaging 4.0% for 2017, and will average 4.4% during 2018.

General Consensus: Rates Will Go Up in 2018

But let’s not get too wrapped up in the exact numbers being presented here. All three of the sources above offer slightly different forecasts for mortgage rates between now and 2018. But the general consensus among these and other predictions is that rates will gradually rise over the coming months.

Over the last couple of years, borrowing costs remained at historically low levels largely due to the fiscal policies of the Federal Reserve. The central bank has held the short-term federal funds rate near 0% for quite some time, as part of a broader economic stimulus program. But they are now allowing interest rates to rise in response to economic growth.

The Federal Reserve does not control mortgage rates directly. But their policies clearly influence the rates assigned to home loans and other financial products that offered to consumers. Due to these and other economic developments, most of the mortgage forecasts for 2018 predict that rates will go up over the coming months.

Home buyers who are “on the fence” might want to consider making their purchases sooner rather than later. This is especially important for buyers in real estate markets with rising prices. In many cities across the U.S., home prices are expected to continue rising to some degree into 2018. This means that buyers in some areas could encounter higher house values and mortgage costs over the coming months. So a case could be made for buying a home sooner rather than later.

Disclaimer: This article includes mortgage rate forecasts and predictions for 2018. These forward-looking statements and analyses were provided by third parties not associated with our company. We have gathered them here as a service to our readers. The owners of this website make no claims or assertions regarding future mortgage rates.