November Mortgage Rates Forecast: Hitting a Plateau (We Hope)
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November mortgage rates forecast
To understand the mortgage rate forecast for November, you first should know what happened in October: Rates behaved abominably. The rate on a 30-year fixed-rate loan rose above 8% for many borrowers. The last time rates were this high, *NSYNC topped the charts (August 2000, "It's Gonna Be Me"). Some of today's mortgage applicants were in grade school!
When mortgage rates cross a 23-year-old threshold, it makes you wonder if they'll keep rising. They might. But the more likely scenario is that they’ll plateau for much of November, although they could succumb to upward pressure after Thanksgiving.
Inflation and the Fed
The Federal Reserve set the stage for a more tranquil November when it kept short-term interest rates unchanged at the end of its Oct. 31-Nov. 1 meeting. That decision was virtually foretold on Oct. 19, when Fed Chair Jerome Powell gave a speech in which he said, "Inflation readings turned lower over the summer, a very favorable development."
Fast-rising prices have been the Fed's enemy for almost two years. The central bank has raised short-term interest rates 11 times, for a total of 5.25 percentage points, since March 2022. The higher interest rates are designed to slow the economy and squelch inflation. Indeed, inflation has fallen. The consumer price index reached 8.9% in June 2022 and fell to 3.7% in September of this year.
But that progress hasn't gone far enough. The Fed wants to slow the inflation rate to 2%, and cutting it by the first 5.2 percentage points was easier than decreasing it by the next 1.7 will be. It's like losing 30 pounds: Dropping the first 20 is easier than shedding the final 10.
If inflation sticks around like flies at a cookout, the Fed will crank up its rate-hiking machinery again. As of late October, financial markets are reflecting around a 25% chance of another increase at the Fed's Dec. 12-13 meeting, according to the CME FedWatch Tool.
After Thanksgiving, if financial markets believe that chance has increased, mortgage rates are likely to creep upward.
How this forecast might go wrong
Rates can go up, down or stand still, and this forecast calls for them to remain about the same in November. Here's how the prediction could go wrong.
Let's say the signs continue pointing toward strong economic growth: inflation remains persistent, companies keep hiring and early holiday shoppers whip out their credit cards with a vengeance. This would push interest rates higher. It's quite possible that November will play out that way.
A less likely scenario is a significant drop in mortgage rates. This could happen if an escalation of war in the Middle East, or terrorism at home, compel investors to buy government and mortgage debt, which is considered a safe investment.
In less grim scenarios, mortgage rates could fall if the inflation rate drops unexpectedly, companies stop hiring and holiday shoppers pull back. Frankly, an abrupt economic slowdown seems unlikely.
You can watch for a couple of key economic reports:
The October employment report comes out Nov. 3. If it shows that nonfarm payrolls grew by fewer than 140,000 in October, that would be a sign that job growth is slowing and inflation might slow, too. That would be good news for mortgage rates. If nonfarm payrolls increase by more than 200,000, the Fed would take that as a sign that it needs to raise interest rates even more. Bad for mortgage rates.
The consumer price index for October will be released Nov. 14. If it shows that inflation didn't slow in October, mortgage rates could go up.
When will interest rates go down?
Three prominent organizations have predicted that mortgage rates will be higher in the final three months of this year than they were in the previous three months. And all three — Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors — predict that mortgage rates will reach their peak in the fourth quarter of this year and drop throughout 2024.
As recently as August, all three organizations were predicting that mortgage rates wouldn't even hit 7% this year. Instead, rates reached 8%. Treat this current forecast with skepticism, too.
October's prediction: What happened
I predicted in early October that mortgage rates could "inch upward" over the month. Rates did more than that: They behaved less like a cute inchworm and more like a spindly spider scrabbling up the shower wall. The average rate on the 30-year mortgage climbed almost half a percentage point for the month, to 7.74% in NerdWallet's daily survey.
