Where are mortgage rates heading?

Since the election, mortgage interest rates have risen about a half point – from around 3.625% to about 4.125% for conventional loans – all subject to your own individual situation.  So what will happen in 2017?  No one knows for sure and it seems like when I write this every year, we expect rates to increase.  In 2016, rates started around 4% and dropped to the mid 3's. No one expected that to happen.  Now rates have increased and many expect rates to increase in 2017 – but not too much.  

The National Association of Realtors expects rates to stay about where they are. They also feel homebuyers will be able to afford the slight increase in rates.

The Mortgage Banker's Association expects rates to increase in 2017, up to close to 4.4% and may be close to 5% by the end of the year. Unemployment is down, wages are up and consumers are spending more – all those are good for the economy but bad for mortgage rates.

Kiplinger (business and financial publisher) expects rates to increase further in 2017, up to about 4.3%. Their reasoning is Fed appointees that will be more likely to raise the Federal Funds Rate, more government spending and rising wages that will increase inflation.

Fannie Mae and Freddie Mac also have stated they expect rates to stay low – Fannie said 3.7% but that was posted the day after the election so that may change. Freddie also said rates would stay about 3.7%, but that was in October and so we can expect an upward revision since the election.  

What can you do to help lower your interest rate?  Make sure you put as much down as you can – you may get a better rate if you can put 20-30% down, if you have the ability to do that.  Make sure your credit score is high. The higher your credit score, the better the interest rate.  It may be worth paying down credit card balances to raise your credit score.  You may even want to look at an adjustable rate – like a 5/1 or 7/1 ARM. Those rates may be lower and if you don't think you will be in the home for more than 5-7 years, they can be a good option.

Truly no one knows for sure what will happen – until it happens – all we are doing is guessing based on previous history.  The reality is rates are still very low based on history.  So if you are thinking about buying a home, now is a great time – there was a time in the past where a rate of 5% was something no one would ever thought would happen – let alone a 4% rate!

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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