FHA Mortgage Rate Forecast Through Summer of 2018: A Steady Rise?

A recent forecast published by a key industry group suggests that FHA mortgage rates could rise through the end of 2017 and into 2018.

This would increase borrowing cost for thousands of home buyers, since the FHA program is one of the most popular mortgage financing options. It is particularly popular among first-time buyers who lack the funds for a large down payment.

Here is an updated forecast for conventional and FHA mortgage rates, extending through the summer of 2018.

FHA Mortgage Rate Forecast: an Upward Climb Through 2018?

In July of 2017, the Mortgage Bankers Association (MBA) updated its long-range finance forecast that includes a variety of indicators relating to the economy.

According to their latest set of predictions, the industry group expects the average rate for a 30-year mortgage loan to climb to 4.5% by the fourth quarter of 2017. (For reference: Thirty-year rates were hovering around 3.92%, on average, when this article was published in July 2017).

That’s a slight increase from their previous forecast issued in June, where they predicted an average of 4.4% by the fourth quarter. So current trends and indicators must be pointing toward continued upward pressure on FHA and conventional loan rates.

Looking beyond that horizon, MBA expects 30-year mortgage rates to climb steadily in 2018 and rise above 5% by the end of that year.

Related: How to get the lowest rate possible

Freddie Mac Also Sees Higher Borrowing Costs

Freddie Mac, the government-sponsored corporation that buys and sells mortgage loans through the secondary market, recently updated its long-range forecast as well. They expect conventional and FHA mortgage rates to average 4.7% in 2018, for a 30-year fixed home loan. The company’s economists estimated that rates would average 4.2% during 2017. So they too expect an increase in borrowing costs over the coming months.

Granted, these are just forecasts for FHA mortgage rates through 2018. They are the equivalent of an educated guess. So you probably shouldn’t use them for financial planning purposes. But it’s nice to know what the experts are thinking. And the general consensus seems to be that conventional and FHA loan rates will increase through the end of this year and during 2018 as well.

That’s not surprising, really, when you consider the fact that mortgage rates have been “held” at unusually low levels due to the Federal Reserve’s stimulus measures. The Fed is now winding down those stimulus measures and has increased the short-term federal funds rate several times over the last 18 months. Given all of these changes, it’s only logical to expect FHA mortgage rates to rise as we move in 2018.

It’s important to note that the rates reported by Freddie Mac and the Mortgage Bankers Association — both in hindsight and within their forecasts — are averages across all borrowers and loans.

The rate you receive for an FHA-insured mortgage loan will vary based on several factors. Among other things, mortgage lenders use risk-based pricing to determine the rates they apply to home loans. This means that “riskier” borrowers are generally charged more interest. Bear this in mind as you encounter additional FHA mortgage rate forecasts down the road.

Disclaimer: This article includes predictions and forecasts for FHA mortgage rates through summer 2018. Those forward-looking statements were provided by third parties not associated with our company. We have gathered and presented them here as an educational service to our readers. Borrowers should view mortgage rate forecasts as an educated guess, not as factual statements. In some cases, they proved to be inaccurate over time. So take them with a grain of salt.