Mortgage Rates Leveling Off and an Easing Housing Market: What 4 Experts Expect In October

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Experts believe the 30-year mortgage rates won't change significantly this month and competitive homebuying still remains a challenge.
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  • Mortgage rates ended September with an increase, but experts aren’t predicting a giant leap with rates in October
  • Homebuyers aren’t likely to find many deals right now, but there is less competition overall
  • Rising mortgage rates are expected to be the long-term trend through the end of 2021 and into 2022

Although mortgage rates jumped to over 3% at the end of September, the consensus among experts is not to anticipate significant increases in the 30-year fixed mortgage rates for October. 

Mortgage and refinance rates have been hovering near 3% for several months, which is low compared to historical mortgage rates. The current mortgage rates and increasing home values have allowed many homeowners the opportunity to refinance to a lower rate or to cash out equity for renovations. 

It’s a different story for homebuyers. The number of homes for sale hasn’t kept up with demand, which has increased home prices and forced many buyers to pay over the asking price. But, experts say there are signs that the housing market has calmed down since the peak frenzy earlier this year. 

Here’s what four experts expect to happen with mortgage rates and the housing market in October 2021. 

Ali Wolf, Chief Economist at Zonda

Ali Wolf
Ali Wolf, chief economist at Zonda, a California-based housing data and consultancy firm.Courtesy of Ali Wolf

Wolf believes mortgage rates are likely to be higher at the end of the year, but there will be some ups and downs along the way. “Our expectation is that there will be volatility in the mortgage market in the near term,” Wolf says. Mortgage rates aren’t expected to shoot up overnight, so today’s lower mortgage rates could linger around a bit longer. Rates have gone up, but there are still issues in the financial markets that need to be worked out before rates will rise further, she says

The housing market has begun to improve for buyers. “After nearly 18 months of having no seat at the table, [buyers] finally have some bargaining power in the discussion,” Wolf says. We’re starting to see a slowdown in home price growth. Wolf says the number of builders that raised prices has dropped from 93% in June to 60% in August. “There still were a lot of builders raising prices but … it’s less crazy than it was.” 

If you’ve been hesitant about becoming a homeowner because you’re uncertain about home prices, Wolf says, don’t try to time the market. There are so many different scenarios that could unfold, says Wolf. Some forecasters say home prices will increase in 12 months, and others say prices will be down, she says. Instead, focus on what you can afford and whether or not homeownership is the right next step for you. 

“What consumers are ultimately buying on is their monthly payments,” Wolf says. If you can afford your monthly payment, what happens in the broader real estate market won’t matter as much.

Logan Mohtashami, Lead Analyst at HousingWire

Logan Mohtashami
Logan Mohtashami, lead analyst at HousingWire, a mortgage and housing market news outlet.Courtesy of Logan Mohtashami

We shouldn’t expect skyrocketing rates in the coming weeks, according to Mohtashami. He says that rates have stayed in a very low range for 2021, and that should still be the case for the rest of the year. As long as other economies around the world are still struggling, that puts a limit on how high rates can go in the U.S.

Borrowers may still have time to lock-in a great rate, but buying a home doesn’t look like it will be getting any easier. “This housing market is the most unhealthy housing market post 2010,” he says. “Not because there’s a bubble or a credit boom or anything like that, it’s just that the shortage of homes is facilitating forced bidding.” The number of homes for sale has increased somewhat from recent lows, but inventory still isn’t fully meeting the demand. We may see a seasonal dip in housing inventory this winter which will not make it any easier for buyers in the coming months.

Dr. Vivek Sah, Director of the Lied Center for Real Estate at the University of Nevada, Las Vegas 

Dr. Vivek Sah
Dr. Vivek Sah, director of the Lied Center for Real Estate at the University of Nevada, Las Vegas.Courtesy of Dr. Vivek Sah

Dr. Sah sees the late September jump in mortgage rates as a normal market fluctuation and not a sustained trend that will carry over into October. “I don’t anticipate much of a change [in mortgage rates], I think it’s just a lot of volatility,” Dr. Sah says. We probably won’t see any significant changes that will affect mortgage rates until the end of December, he says. So we could see mortgage rates remain near their current levels until later this year.

That’s good news for homeowners who haven’t refinanced to a lower interest rate or who are looking to cash out some of their new found equity. For anyone considering refinancing, it’s important to shop around and compare mortgage lenders. There is more competition for borrowers, which helps you get a good bargain on your rate regardless of what’s happening in the overall market, says Dr. Sah. He recently closed on a cash-out refinance loan by shopping around, and he was able to reduce his interest rate by 0.5%, he estimates.

Daryl Fairweather, Chief Economist at Redfin

Daryl Fairweather
Daryl Fairweather, chief economist at Redfin, a real estate brokerage firm.Courtesy of Daryl Fairweather

Fairweather believes the long-term trend will be rising mortgage rates. The Federal Reserve has said it plans to taper their bond purchases and to start raising interest rates next year, Fairweather says. “If that were to happen, then you should expect mortgage rates to rise.” With the mortgage spike in late September, “it seems like it’s already happening.” Her advice to homebuyers wanting to lock in a low rate is to consider buying sooner rather than later.

But in many areas, the housing market is challenging for buyers. One reason competition is stiff is because housing demand has outstripped supply. The good news is that buyers aren’t facing quite as much competition right now as they were earlier in the year. Roughly 59% of home offers faced competing bids in Aug. 2021, which is down from 72% in April, according to Redfin. But that doesn’t mean you should expect to scoop up a home at a discounted price. “Prices aren’t going to come back down. They’re high. They’re going to stay high,” Fairweather says. 

However, with less competition, you might have more flexibility with your offer terms and be able to include buyer protections, such as an appraisal contingency, which wouldn’t have been an option a few months ago.

What Do the October Mortgage Rate Trends Mean for Refinancing?

Homeowners who haven’t gotten in on the refinance boom still have options because refinance rates are exceptionally low, and home values have increased dramatically

If you haven’t locked in a lower rate in the last few years, you could reduce your interest rate significantly and cut your monthly payment while saving on interest in the long term. Having more equity also opens the door to the possibility of doing a cash-out refinance.

While a cash-out refinance will increase your loan balance, it can save you money in other ways. For example, your mortgage rate is likely to be much lower than your credit card’s APR. A cash-out refinance could be an effective way to consolidate your debt with a lower interest rate.

How Refinancing to a Lower Mortgage Rate Can Save You Money

Refinancing to a lower interest rate can lower your monthly payment and dramatically reduce the overall interest you’ll pay. Here’s an example:

  • Home purchase value: $450,000 
  • 10% down payment: $45,000
  • 30-year fixed mortgage
  • 4.25% interest rate on the $405,000 loan (after down payment) 

After making payments for five years, your loan balance would be about $367,105, according to the NextAdvisor mortgage calculator

By replacing your existing mortgage with a 30-year refinance loan at 3.25%, you would cut your monthly payment by $255 and lower the interest by nearly $23,000. 

Loan AmountInterest RateMonthly PaymentTotal Interest Remaining
Current Loan$367,1054.25%$1,992$228,761
Refinance Loan$367,1053.25%$1,597$208,219
Difference1%$395$20,542

For a refinance of a $367,105 loan you could easily pay over $10,000 in closing costs. With your $395 a month in savings, it would take over two years to break even. As your closing costs go up, that break-even point gets pushed back even further. 

Anytime you refinance, be sure to pay close attention to the fees or consider a no-cost refinance where you receive a lender credit to cover fees in exchange for a higher interest rate.

What Does October’s Housing Market Look Like for Buyers and Sellers?

Stiff competition from buyers has led to rising home prices, which has priced some buyers out of the market. “There have been a lot of buyers that have stepped onto the sidelines,” Wolf says. While housing inventory is still low, having fewer buyers bidding on homes has moderated the market somewhat.

However, this is still firmly a seller’s market. Buyers are unlikely to negotiate a discount on the price, although it looks like the rate that home prices are increasing is starting to slow down. As we get into 2022, instead of seeing significant price growth in home values each month, some experts believe we may see this begin to slow down.  

But there is still a lot of uncertainty. If the buyers who have been waiting out the market decide to restart their home search, “the market can really quickly shift back from hot to white hot,” Wolf says. So the best course of action for home buyers is to not try to time the market. Instead, focus on how much house you can afford and don’t let yourself be forced into paying more than what you’re comfortable with.