Mortgage Rates Rising, But Not Too Quickly

posted 8/7/2017 in Mortgage

Take Advantage of Competitive Housing Markets!

Mortgage Rates Rising, but Not Too Quickly

It doesn’t get any better than this, or at least that’s the consensus of Bankrate, USA Today and Forbes, to name a few. 2016 was a great year in the mortgage world, with interest rates hovering around 3.75 percent for quite some time and, in retrospect, was the year to buy.

According to the Mortgage Bankers Association, Fannie Mae, and Wells Fargo, the average mortgage rate will stay above four percent for 2017. While this may seem like motivation to rush into a home purchase, economists are suggesting that mortgage rates would have to be much higher to slow down demand. “The house buying power that borrowers have, even with rates below five percent, still remains historically strong,” said First American chief economist Mark Fleming.

While it is undoubtedly a good year to buy, experts also suggest time is on your side to find a home as rates aren’t expected to skyrocket. Experts across the board are predicting 2017, which has already started off above four percent, will continue to rise, but slowly. In the weekly mortgage rates survey, Freddie Mac said, “Increasing inflation, continued gains in the labor market and the Fed’s intentions for further rate increases – all three will keep pushing mortgage rates up this year.”

The frustrating aspect of the ripe buyer’s market is that supply is still short, although Forbes is optimistic that this will improve, if only slightly. “A complete turnaround is unlikely in 2017,” said Forbes representative Samantha Sharf, “but there are some signs the coming year could see a small bump in housing supply—at least on the new home front.” New political leadership has seemed to strengthen the motivation of homebuilders, which is even more encouraged by the higher demand for homes amid the short supply.

This is not likely to improve the value of existing homes. For existing homeowners, the current low rates and lack of financial promise are motivation for them to stay in their homes, as opposed to upgrading and risking a higher rate. This could continue to hinder home supply for new buyers.

Another surprising factor to even lessen the pool of options is that the millennial demographic are expected to become a larger portion of buyers. According to Zillow, half of all home buyers are under age 36 and are expected to move into more affordable housing locations, thus intensifying the already competitive market.

On the bright side, Bankrate suggested that home prices will be slower to rise as home purchases pick up in the warmer weather due to the rising mortgage rates. This provides motivation to purchase at a lower cost. And to further assist the market, many are hopeful that the Donald Trump administration might privatize Fannie Mae and Freddie Mac. President of MenloFinancial, Rick Roque believes that this privatization will “infuse those organizations with more capital, which will enable them to purchase greater volumes of mortgages from lenders.” This gives hope for lower or maintained interest rates. Contact one of our mortgage lending professionals today to take advantage of the competitive housing market. 

Lincoln Savings Bank | Member FDIC | Equal Housing Lender

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