Don’t Worry – Rates Peak EVERY October; 8% Last October Before Falling to 6.6% By December; 2022 Was Similar

Mortgage rates shot higher again today – and rates are now almost 3/4% higher than where they were in early September.

As a result of sharply higher rates and typical seasonal slowness, home purchase and mortgage volume are at rock bottom levels.

Rates Started To Climb With The September Effect

In mid-August, I predicted that rates would go up in September , based on what Jeff Snider calls the “September effect.”

However, I was remiss for not pointing out when rates typically stop going up.

Rates Peak In Late October – Before Falling Quickly

Last year at almost this exact same time, the average mortgage rate peaked at over 8.0% before steadily falling to about 6.6% in late December.

In 2022, the average rate peaked at about 7.4% at this time in October before falling to about 6.4% in December.

Rates peaked in late October of 2021 as well before falling about 25 basis points.

And, in 2020, we saw rates peak at a whopping 3.04% before steadily falling to about 2.75%.

Shout out to Barry Habib who pointed this out today, calling it the “October effect.”

This interactive Mortgage News Daily chart illuminates the September and October effects very clearly.

This Year Might Be Different – But Not For Long

I would, however, not be surprised to see rates continue to edge up through the election given what appears to be an effort to flood the economy with liquidity in the form of a surge of government spending.

And, I would not be surprised to see rates edge up for a few days after the election too, for reasons I set out in this blog: Two Reasons Why Rates Will Shoot Higher After the Election .

But after the election, when the spending surge slows, when more accurate economic data starts to surface, and when the normal post-October effect returns, I would not be surprised at all to see rates dip again like we’ve seen the last four years.

Hence, I am solidly in the “hoping for lower” camp, but as George Gammon reminds us frequently: “There are no certainties; only probabilities.”