California VA Loan Rate Update for October 2020 & Outlook

This report is part of an ongoing series of updates on VA loan rates in California. Today, we will examine current mortgage rate trends across the state, along with a forecast for 2021.

Note: This report was created using the latest VA loan rates, trends and data, as of October 1, 2020. Forecasts for 2021 were provided by third-party sources.

VA Loan Rates Drop to a Historic Low

During the week ending on October 1, 2020, the average rate for a 30-year fixed mortgage dropped to a record-setting low of 2.88%. That’s based on the weekly industry survey conducted by Freddie Mac.

That 2.88% figure is something of a milestone. As of this writing, it’s the lowest average in five decades worth of record keeping. And that’s worth repeating: California VA loan rates are currently hovering at their lowest level of the last 50 years!

This is a huge opportunity for anyone planning to use a VA loan in California. But you might want to act quickly. We don’t know how long rates will remain in the upper-2% range, where they are right now. They could very well tick upward over the coming months.

According to a recent statement from the research team at Freddie Mac:

“As a result of low mortgage rates that have stayed under three percent since July, the housing market has seen a strong, upward trajectory during a very uncertain time. We’re seeing potential home buyers who now have more purchasing power and many current homeowners who have the option to refinance their loan for a better rate.”

Now that we’ve entered October, some home buyers in California might be wondering if they should buy now or next year. Some might be inclined to shelve their purchasing plans for now and start fresh in early 2021.

This kind of decision largely depends on your current financial situation and long-term plans. But from a mortgage rate standpoint, it might be best to buy a home sooner rather than later, to take advantage of today’s low VA loan rates.

Refinancing with the ‘IRRRL’ Program

California VA loan rates are currently hovering near a historic low, and a lot of home buyers across the state could take advantage of that. And the same is true for homeowners.

A September 2020 report from the mortgage analytics firm Black Knight showed that millions of homeowners in American could still benefit by refinancing their existing mortgage loans into a lower rate. And this applies to a lot of homeowners in California who are currently paying off their VA loans.

The Department of Veterans Affairs offers a unique refinancing program for homeowners who have an existing VA loan. It’s called the interest rate reduction refinance loan, or IRRRL. This program is ideal for homeowners with a VA loan who want to secure a lower rate and reduce their monthly payments. In fact, that’s exactly what the program is designed for.

And with California VA loan rates sitting at a record low, now could be a great time to refinance an existing mortgage. Depending on the circumstances, homeowners who pursue this strategy could save a lot of money over the long term.

The eligibility requirements for this program are fairly straightforward. In order to qualify for an interest rate reduction refinance loan (IRRRL) in California, you must already have a VA-backed home loan in place on your home.

Additionally, you must certify that you “currently live in or used to live in the home covered by the loan.” That’s a direct quote from the Department of Veterans Affairs website.

MBA’s Rate Forecast For 2021

Home buyers and homeowners who act within the next few weeks could take advantage of the lowest California VA loan rates we’ve ever seen. But what about the future? What are mortgage rates expected to do through the end of this year and into 2021?

Long-range interest rate forecasts can be challenging, even in the most stable of economic times. And right now, the economy is stumbling. The housing market is on solid footing, as we’ve reported in the past. But we still have high unemployment and other economic issues.

All of this makes it harder to predict the future of mortgage rates.

That being said, one mortgage industry group recently predicted that conventional and VA loan rates could inch upward over the coming months.

In its September 2020 forecast, the Mortgage Bankers Association predicted that 30-year mortgage rates would average between 3.1% and 3.2% through the first half of 2021. That would be a slight increase from where they are right now, as of October 2020.

So, based on this particular forecast, home buyers and homeowners who use a California VA loan in the future could pay higher interest costs.

The bottom line: We know California mortgage rates are very low right now, as of early fall 2020. But we don’t know what they might look like two, four or six months down the road. So if you’re already prepared to buy or refinance a home with the VA loan program, now might be the right time to do it.