Where Will Mortgage Rates Head Next Year?
Currently, the home financing climate continues to be favorable for prospective borrowers. But mortgage rates can change quickly, and your ability to lock in at an enticing fixed rate today may dwindle in the coming months.
Which begs the question: where will mortgage interest rates be in 2017?
To see where rates might move in the coming year, it’s constructive to ask experts for their 2017 rate predictions. Consulting with industry insiders can yield insights that may tell you when to pull the trigger on a rate lock and commit to a mortgage loan or refinance.
Forecasts varied among interviewed professionals. Many are looking at world events, the upcoming presidential election, and even unforeseen events to influence the direction of mortgage rates in the new year.
What Goes Down Must Come Up
To more accurately estimate where rates are headed in the coming year, it’s important to first review rate trends in 2016 thus far.
In early 2016, rates hovered around the four percent mark and then fell about 0.5 percent, hitting bottom in June and July. They have not risen much since then, partly due to fears about the economy.
In addition, the Fed delayed its plans to increase short-term rates because economic growth has not yet justified an increase.
Continued low interest rates are good news for would-be buyers planning to purchase soon. But a lot can change six or 12 months from now.
“I expect mortgage rates to increase approximately a quarter percent over the next six months and rise approximately a half percent, or 50 basis points, over the course of the next 12 months,” says Dan Smith, president of PrivatePlus Mortgage in Atlanta. He notes that one basis point is equivalent to 1/100th of one percent.
“If gross domestic product moves above three percent, I would expect mortgage rates to rise more quickly,” says Smith. “You may also see fluctuations in mortgage rates based on the next president’s policies and the corresponding response from the financial markets.”
Watch The Fed And The Economy
Michael Goldrick, senior vice president and chief lending officer for PCSB Bank, headquartered in Yorktown Heights, N.Y., agrees that rates will head north slightly next year.
“Indications are that 30-year and 15-year mortgage loans will increase by 12.5 to 25 basis points in the next six to 12 months, caused by further economic growth and stability. The historically low interest rate environment that currently exists makes the possibility of lower rates unlikely,” says Goldrick.
Whitney Fite, president of Atlanta-based Angel Oak Home Loans, also believes rates are due to tick up.
“Some market participants are expecting two to three Federal rate hikes between now and the end of 2017. The Fed continues to be the biggest buyer of mortgage-backed securities in the market. If they slow down on these purchases, the supply and demand relationship will invert, causing heavy volatility — which could have more of a negative effect on mortgage rates than a Fed hike,” Fite says. “Therefore, I expect 30-year rates to be in the low to mid 4 percent range and 15-year rates to be in the high 3 percent range.”
The results of the November presidential election could also affect mortgage rates in 2017 more than anticipated.
“If the elected president reduces U.S. corporate tax rates or impacts policy to improve business, stocks are expected to rise. And if stocks rise, funds will be pulled out of the bond market, causing interest rates to rise,” says Julie Morris, associate broker/branch manager for Julie Morris Premier Team at HomeSmart in Scottsdale, Ariz.
2017 Mortgage Rates: Replay Of 2016?
Not everyone believes that mortgage rates will increase, however. Longforecast.com predicts that mortgage rates will remain below 3.5 percent in early 2017.
Kiplinger expects the Fed to increase short-term rates at its December meeting, but says, “Even with a rate hike, interest rates will likely stay low and fluctuate within a narrow range for some time to come. Only when inflation shows a stronger upward trend, or when the Fed commits to making progress on raising the federal funds rate to a more “normal” level of three percent, will rates show a sustained upward trend.
Michael Winks, Executive Vice President/chief lending officer for Grand Rapids, Mich.-headquartered Northpointe Bank, also anticipates rates remaining in their current range through 2017 – around 3.75% to 4.25% for the 30-year fixed mortgage and 2.75% to 3.25% for the 15-year fixed mortgage.
“The Fed and many economists have been predicting about a half percent increase in long-term mortgage rates each year going back to the Great Recession, and each year rates essentially have stayed within the same range — moving lower due to the stagnant economy and continued uncertainty on alternative investment opportunities abroad,” says Winks.
Act Now Or Wait It Out?
Considering that most pros think mortgage rates will slightly increase or remain about the same without going lower over the next year, loan candidates who are serious about purchasing a home as well as existing homeowners eager to refinance need to ask themselves a serious question: Should I lock in now at a current low rate or take my chances down the road later in 2017?
“I think now is the time to act, whether you are looking to purchase or refinance,” Fite says. “I suggest even more urgency if you’re looking to purchase, since prices continue to rise in most areas. Even a small price increase of five percent, coupled with an interest rate that is one eighth to one half percent higher than they are today, can cost a home buyer thousands of dollars.”
Smith concurs that locking in sooner versus later makes sense, but only “if the pricing available allows you to own the home within your budget,” he says. “And if you can refinance today and lower your rate, with your lender paying the closing costs, do so.”
What Are Today’s Mortgage Rates?
Today’s mortgage rates are in a rock-bottom range. If you’re ready to buy a home or save money with a refinance, there’s no time like the present to capitalize on today’s record-setting rates.