What could make mortgage interest rates drop this October?

Mortgage interest rates aren’t perfect right now but they’re certainly becoming a lot more favorable for borrowers. After surging to their highest level in more than 20 years in 2023, mortgage rates have since dropped by more than a full percentage point on average. In mid-September, they fell to their lowest level in more than two years. And that’s before presumed additional rate cuts to come courtesy of the Federal Reserve in November and December.

But there is no Federal Reserve meeting scheduled for October, so borrowers hoping for some relief via that channel will need to look elsewhere. That doesn’t mean that mortgage interest rates can’t still fall in the month, though. It may just be as a result of activity unrelated to the Fed. 

So what could make mortgage interest rates fall further in October? Below, we’ll detail three things buyers should watch for.

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What could make mortgage interest rates drop in October?

While predicting the future of mortgage interest rates is inherently difficult, there are some factors to take into consideration that could cause mortgage rates to fall further in October. Here are three to know now: 

Unemployment numbers

Unemployment statistics for September will be released by the Bureau of Labor Statistics on Friday, October 4. A rise in the unemployment rate for that period or any revisions that show a wider, growing issue with employment could be an indicator that further Fed action is required to help the economy. Understanding this dynamic, then, lenders may preemptively begin lowering their mortgage rate offers in response. It may not be a substantial reduction — and it may be temporary — but it could mean a lower rate than today’s average of 6.21%.

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Cooling inflation

A continually cooling inflation rate will give the Fed the confidence it requires to issue additional rate cuts. When the next inflation report is released on October 10, then, mortgage rates could fall again if the latest inflation numbers show additional progress toward getting the rate down to the Fed’s target 2% goal. Remember that mortgage interest rates change daily, so while they may appear unchanged when the report’s released, they could be markedly different the next day and in the days after.

Broader market uncertainty

While not clearly defined and without a specific correlation to mortgage rates, broader market uncertainty could also contribute to a moderate drop in mortgage interest rates in October. With geopolitical concerns elevated right now and a looming presidential election in the U.S. barely a month away, lenders may started adjusting their mortgage rate offers to better prepare for any volatility in the final months of the year. 

Similarly, any public comments from Fed officials about the future of rate cuts could cause lenders to reconsider their current mortgage rates and adjust them downward again. And, as has been seen in recent years with the pandemic, unforeseen events could cause dramatic changes to the lending environment as well. 

The bottom line

Predicting the future of mortgage rates is an inexact science heavily reliant upon speculation. But with new data tied to unemployment and inflation set to be released in October, as well as some broader economic trends tied to both geopolitical and domestic concerns, there’s enough action taking place in the month that could encourage lenders to lower mortgage interest rate offers yet again. But you’ll need to monitor the rate climate closely to take advantage and start taking certain steps now, like improving your credit score, so you’re truly prepared to act when the opportunity presents itself.

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