Mortgage rates forecast for April 2020
Mortgage rates are set to swing wildly in April amid ever-developing COVID-19 news.
The coronavirus wreaked havoc on the stock market in March, and typically that leads to lower rates.
But these days, all bets are off.
Rates skyrocketed to levels not seen since January after briefly hitting an all-time-low in early March. Will mortgage rates go down again in April 2020?
While there’s a chance of that, we predict rates staying above all-time-lows until at least June.
Still, prudent rate shoppers should be ready to secure a historic rate if the opportunity presents itself. Our advice: apply now and lock later.Find and lock a low rate today. (Apr 9th, 2020)
In this article:
- Mortgage rates next 90 days
- Mortgage rate predictions
- Federal Reserve moves
- Mortgage rate trends
- Mortgage strategy for April
- Conventional, FHA, VA, and USDA rates
- Economic calendar
Predictions for April
April will be a wild ride for mortgage rates. The only question is, will they be more or less advantageous for mortgage shoppers?
As this is written, Freddie Mac reports a 3.65% average mortgage rate. But the path to get here wasn’t a smooth one.
Below is how rates have shaped up so far in 2020, and where we expect them to go from here.Lock in today's rates before they rise. (Apr 9th, 2020)
Mortgage rates next 90 days
The below chart shows past mortgage rate trends, plus predictions for the next 90 days based on current events and 2020 forecasts from major housing authorities. Keep reading to find out why we think rates are headed even lower in 2020.
COVID-19 dominates headlines, and mortgage rate movements, too
In the last 30 days, the coronavirus, also known as COVID-19, has put entire nations on lockdown, gutted the stock market, and worst of all, created a serious health situation worldwide.
It also brought on the lowest rates of all time.
On March 5, 2020, Freddie Mac reported a 3.29% average 30-year mortgage rate, beating out the previous best of 3.31% in November 2012.
Students of mortgage rate movements know that uncertain economic times often bring about low mortgage rates.
But the silver lining to an awful world event soon faded.
The news of all-time-low rates spread and consumers took notice. Lenders received many months’ worth of refinance applications in just a few days. Lenders soon had no choice but to artificially and dramatically increase rates: they simply couldn’t handle the volume.
The result: Rates shot from 3.29% to 3.65% two weeks later, says Freddie Mac. That’s one of the fastest rates increases mortgage rates have ever seen.
So are ultra-low rates returning? We think so, and here’s why.
Our prediction: Ultra-low rates will return
History says mortgage rates should be about 2.85% right now.
Yes, you read that right: 2.85%.
But there are a couple reasons rates aren’t that low:
- Lenders can’t handle the volume, as mentioned above
- Investors aren’t buying mortgages at the expected rate
For mortgage rates to be rock-bottom, there needs to be a huge demand from investors to purchase these low-3% and even high-2% mortgage bonds. Typically, investors buy mortgages as a safe-haven investment when the stock market is tanking, like right now.
But investors are hesitant because 1) they are afraid homeowners will refinance, eliminating the earned interest and; 2) they are fearful of defaults, as coronavirus threatens people’s jobs and businesses.
But in a few months, a few things could happen to bring about another round of all-time-low rates.
Lenders volumes ease
Lenders are swamped at the moment, and it could take 90 days for them to clear pipelines of current business. But then what?
Well, then they have to keep business at a hot clip to support all the staff they just hired. Lenders will have no choice but to get competitive again, and another refinance boom will be underway.
Uncle Sam will boost mortgage bond demand
As mentioned, everyday investors are wary of mortgage-backed bonds. This is putting upward pressure on rates.
But the Federal Reserve just committed to buying $200 billion worth of mortgage bonds in an effort to prop up the economy. This will increase demand for mortgage-backed securities (MBS) and therefore lower rates.
We don’t think this is the end government involvement in mortgage markets. COVID-19 will test the U.S. economy in unprecedented ways, and the Fed is fully committed to keeping the economy afloat.
We wouldn’t be surprised if the Fed commits to buying more than $2 trillion worth of MBS before this is all over.
So we wouldn’t be surprised if the Fed commits to buying more than $2 trillion worth of MBS before this is all over. In the last recession, Uncle Sam ended up with $1.7 trillion in MBS, and this crisis could be even worse.
Investors will buy mortgage bonds again
Investing in mortgages is an unattractive proposition for investors at the moment. Homeowners could either refinance or default due to current conditions.
But investors might be attracted to small but steady returns that mortgage bonds provide in this unsettling environment. It’s possible that U.S. Treasury bonds will offer negative yields before this is all over, as many government bonds worldwide already do.
So investors may see that a 2% return on a relatively safe bond could seem irresistibly attractive — and a great way to ride out a recession.
All-time-low rates again in June?
All of the above factors could work together to bring another round of brief but available all-time-low rates in about 90 days.
But don’t expect these rates to hang around for long. We’ll see another round of overwhelmed lenders and spooked investors when the onslaught of applications ensues. (See the above graph to see just how fast rates could rise.)
So what’s your strategy? If you’re refinancing, you may want to keep your file active and updated with your lender so you can lock and close the moment rates hit rock-bottom.
This will involve applying now, but floating until the opportune time. You may even want to supply all your income and asset documentation. However, hold off on ordering an appraisal until you lock. An appraisal is a non-refundable fee.Lock in today's rates. Start here. (Apr 9th, 2020)
After cutting rates to near-zero, what will the Fed do next?
As recently as early February, everyone expected the Fed to maintain its federal funds rate into 2021, then start raising rates.
Then, as COVID-19 worries gripped markets, the group slashed its rate by 1.5% to near-zero levels. In addition, it committed to buying $700 billion in bonds to prop up markets.
You can see the drastic change in Fed forecasts comparing last month to this month.
What the Fed does next is anyone’s guess. The group can’t go lower its benchmark rate, unless it goes negative.
At least one thing is certain: the Fed will not be raising its rate any time soon. Markets will focus on its other moves, such as buying additional Treasuries and mortgage-backed securities, plus other stimulus to keep the U.S. economy on its feet.
The next scheduled Fed meeting is April 28-29. But these days, all bets are off. In March, it held two emergency meetings and canceled its scheduled meeting.
So be on the lookout for unplanned Fed decisions in April. We have a feeling that the group is cooking up a never-before-seen stimulus package to address the COVID-19 fallout.
The reason is that the Fed never quite unwound stimulus from the last recession. The fed funds rate was near historic lows when coronavirus started, and the group still held $1.3 trillion in mortgage-backed securities left over from previous stimulus. To move the needle this time, the Fed will have to do something brand new.
As a mortgage shopper, be ready for unprecedented Fed involvement in markets, and potentially ultra-low mortgage rates as a result.
Mortgage rate trends as predicted by housing authorities
Housing agencies nationwide are calling for rates in the high 3s for 2020.
|Agency||30-Yr Rate Prediction|
|National Association of Realtors||3.60%|
|National Association of Home Builders||3.90%|
|Mortgage Bankers Association||3.90%|
|Average of all agencies||3.70%|
To sum it up, rate predictions vary widely. Today’s rate might be as good as we’ll see for years to come, or they might improve.
Mortgage strategies for April 2020
In April, be ready for an unexpected rate drop. We expect rates to stay above recent lows until about June, but there could be an unexpected dip sooner.
Mortgage lenders kept rates artificially high through most of March after rates hit an all-time-low early in the month. But this trend could reverse at any time.
Apply early. Most homeowners were caught off guard the last time rates plummetted. They had to scramble to apply and lock in hopes of capturing ultra-low rates that were only around for a few days.
If you want to be ready this time, apply now, and submit all the necessary documentation like pay stubs, W2s, and bank statements. Don’t order an appraisal just yet. When rates fall through the floor, contact your lender and lock in. Then grant permission for the lender to order the appraisal.
Your loan file will be ready to close faster, and you’ll be ahead of the next wave of refinances.Apply for a niche loan program. Start here. (Apr 9th, 2020)
Many mortgage shoppers don’t realize there are many different types of rates. But this knowledge can help home buyers and refinancing households find the best value for their situation.
Following are updates for specific loan types and their corresponding rates.»RELATED: Know Your Options: Should I put less than 20% down on a house?
Conventional loan rates
Conventional refinance rates and those for home purchases have trended lower in 2020.
According to loan software company Ellie Mae, the 30-year mortgage rate averaged 3.89% in February (the most recent data available).
This is higher than Freddie Mac’s 3.65% average because it factors in low credit and low-down-payment conventional loan closings, which tend to come with higher rates.
Lower credit score borrowers can use conventional loans, but these loans are more suited for those with decent credit and at least 3% down. Five percent down is preferable due to higher rates that come with lower down payments.
Twenty percent of equity is preferred when refinancing.
With adequate equity in the home, a conventional refinance can pay off any loan type. Got an Alt-A, subprime, or high-PMI loan? A conventional refi can take care of it.
For instance, say you purchased a home three years ago with an FHA loan at 3.5% down. Since then, home values have skyrocketed.
You now have 20% equity, so you can refinance into a conventional loan and eliminate FHA mortgage insurance.
This could be a savings of hundreds of dollars per month, even if your interest rate goes up.
Getting rid of mortgage insurance is a big deal. This mortgage calculator with PMI estimates your current mortgage insurance cost. Enter a 20% down payment to see your new payment without PMI.Find a low conventional loan rate. Start here. (Apr 9th, 2020)
FHA mortgage rates
FHA is currently the go-to program for home buyers who may not qualify for conventional loans.
The good news is that you will get a similar rate — or even lower — with an FHA loan than you will with conventional.
Related: Read more about FHA costs and requirements on our FHA loan calculator page.
According to loan software company Ellie Mae, which processes more than 3 million loans per year, FHA loan rates averaged 3.87% in February (the most recent data available), a bit lower than the average conventional rate.
Another interesting stat from Ellie Mae: About 30% of all FHA loans are issued to applicants with scores below 650.
FHA loans come with mortgage insurance. But the overall cost is not much more than for conventional loans.
A little-known program, called the FHA streamline refinance, lets you convert your current FHA loan into a new one at a lower rate if rates are now lower.
An FHA streamline requires no W2s, pay stubs, or tax returns. And you don’t need an appraisal, so home value doesn’t matter.
Learn more about the FHA streamline refinance here.Find low FHA rates. Start here. (Apr 9th, 2020)
VA mortgage rates
Homeowners with a VA loan currently are eligible for the ever-popular VA streamline refinance.
No income, asset, or appraisal documentation is required.
If you’ve experienced a loss of income or diminished savings, a VA streamline can get you into a lower rate and better financial situation. This is true even when you wouldn’t qualify for a standard refinance.
But don’t overlook the VA loan for home buying. It requires zero down payment. That means if you have the cash for closing costs, or can get them paid for by the seller, you can buy a home without raising any additional funds.
Don’t overlook the VA loan for home buying. It requires zero down payment.
VA mortgages are offered by local and national lenders, not by the government directly.
This public-private partnership offers consumers the best of both worlds: strong government backing and the convenience and speed of a private company.
Most lenders will accept scores down to 620, or even lower. Plus, you don’t pay high interest rates for low scores.
Quite the contrary, VA loans come with the lowest rates of all loan types according to Ellie Mae. In February (the most recent data available), 30-year VA mortgage rates averaged just 3.62% while conventional loans averaged 3.89%, representing a big discount if you’re a veteran.
Check your monthly payment with this VA loan calculator.
There’s incredible value in VA loans.Check today's VA loan rates. Start here. (Apr 9th, 2020)
USDA mortgage rates
Like FHA and VA, current USDA loan holders can refinance via a “streamlined” process.
With the USDA streamline refinance, you don’t need a new appraisal. You don’t even have to qualify using your current income. The lender will only make sure that you are still within USDA income limits.
Home buyers are also learning the benefits of the USDA loan program for home buying.
No down payment is required, and rates are ultra-low.
Home payments can be even lower than rent payments, as this USDA loan calculator shows.
Qualification is easier because the government wants to spur homeownership in rural areas. Home buyers might qualify even if they’ve been turned down for another loan type in the past.Find a lock low USDA rates. (Apr 9th, 2020)
Mortgage rates today
While a monthly mortgage rate forecast is helpful, it’s important to know that rates change daily.
You might get 3.5% today, and 4.0% tomorrow. Many factors alter the direction of current mortgage rates.
To get a synopsis of what’s happening today, visit our daily rate update. You will find live rates and lock recommendations.
April economic calendar
The next thirty days hold no shortage of market-moving news. In general, news that points to a strengthening economy could mean higher rates, while bad news can make rates drop.
- Thursday, April 2: ISM Manufacturing
- Friday, April 3: Nonfarm Payrolls, wages, unemployment rate
- Tuesday, April 7: JOLTs Job Openings
- Thursday, April 9: Initial Jobless Claims
- Wednesday, April 15: Retail Sales
- Wednesday, April 15: NAHB Housing
- Thursday, April 16: Housing Starts, Building Permits
- Tuesday, April 21: Existing Home Sales
- Wednesday, April 29: Fed meeting adjourns
Now could be the time to lock in a rate in case these events push up rates this month.
Mortgage rates Q&A
In this FAQ:
- What are the current mortgage rates today?
- Will mortgage interest rates go down in 2020?
- Can you negotiate a better mortgage rate?
- Is 3.875% a good mortgage rate?
- Which mortgage company has the best rates?
- How much does 1 point lower your interest rate?
- How can I avoid paying closing costs?
Below are some of the most common questions about mortgage rates.
Mortgage rates fluctuate based on market conditions and your specific situation. For instance, someone with a high credit score will get a lower rate than someone with a low score. To see average rates, go to themortgagereports.com/today or contact a lender over the phone or online here.
According to our survey of major housing authorities such as Fannie Mae, Freddie Mac, and the Mortgage Bankers Association, the 30-year fixed rate mortgage will average around 3.7% through 2020. Rates are even lower than that as of March 2020. See the full forecast from housing authorities here.
Yes. Lenders have the flexibility to drop their rates and fees. Often, you must approach a lender with a better offer in writing before they will lower their rate.
Historically, it’s a fantastic mortgage rate. The average rate since 1971 is more than 8% for a 30-year fixed mortgage. To see if 3.875% is a good rate right now and for you, get 3-4 mortgage quotes and see what other lenders offer. Rates vary greatly based on the market and your profile (credit score, down payment, and more).
Most companies have similar rates. However, some offer ultra-low rates to gain market share. Others have lower rates for FHA than conventional, or vice versa. The only way to know if your company is offering the lowest rate is to get quotes from various lenders.
A point is a fee equal to 1% of your loan amount, or $1,000 for every $100,000 borrowed. Your rate could drop 0.25%-0.50% or more for each point paid, however, that can vary greatly depending on the lender, loan characteristics, and borrower profile.
You can 1) request a lender credit; 2) request a seller credit (if buying a home); 3) increase your mortgage rate to avoid points; 4) get a down payment gift (which can be used for closing costs); 5) get down payment assistance. Find more strategies here.
What are today’s mortgage rates?
Low mortgage rates are still available. You can get a rate quote within minutes with just a few simple steps to start.Show Me Today's Rates (Apr 9th, 2020)