October Mortgage Outlook: No Rate Jumps or Scares

Mortgage interest rates have fallen for the last five months, but October could break the streak. Mortgage rates were heading down in anticipation of action from the Federal Reserve. Now, while the Fed’s 2024 rate cuts train has just left the station, mortgage rates have already reached the destination. Mortgage rates may idle above 6% until markets and the Fed catch up.

That 100-basis-point drop? Mortgage rates have already priced it in, with average interest rates for 30-year, fixed-rate loans tumbling from a high of 7.22% back in early May to 6.08% during the last full week of September. Rates moved modestly upward following the Fed announcement, but that week’s bounce has been less impactful than the previous months of downward movement.

That said, if the Federal Reserve’s plans were to change — which could happen, if economic data warrants a shift — mortgage rates’ trajectory could change, too. During the press conference following the September announcement, Fed chair Jerome Powell repeatedly emphasized that the committee would closely monitor the data and make decisions “meeting by meeting.”

If the economy were to begin rapidly cooling, say if unemployment shot upward and hiring dramatically slowed, the Fed could announce larger cuts, creating room for mortgage rates to fall. But if the economy were to heat up — for example, if the rate of inflation meaningfully accelerated — we could end up with fewer or smaller cuts than anticipated. In that case, mortgage rates could rise. There’s also a decent likelihood that mortgage rates will stay around their current level, but the overall uncertainty makes for plenty of suspense.

Lots of new data will roll in before the Federal Reserve’s next meeting Nov. 6-7, which also falls a day later than usual to accommodate Election Day. No one can be certain that the Federal Reserve will stay on the rate-cutting track. And, as demonstrated this spring and summer, mortgage rates won’t necessarily wait around for Fed action.

Forecasts from Fannie Mae and the Mortgage Bankers Association see mortgage interest rates moving lower, but it’s not a dramatic drop. To be honest, it’s barely a slope. In a somewhat unusual twist, Fannie Mae and the MBA’s forecasts for the near future aren’t just similar, they are nearly identical.