Current mortgage rates are near a 17-month best, putting millions of U.S. homeowners "in the money" to refinance to lower rates and payments. But will low interest rates last?
Consumers say no.
According to a monthly survey conducted by government-backed Fannie Mae, 94% of U.S. consumers believe that mortgage rates have stopped dropping. Rising rates would close the refinance window for many U.S. homeowners; and, would increase the cost of homeownership nationwide.
Today, mortgage lenders quote rates and APRs in the 3s. By this time next year, consumers say, pricing will be worse.
Current mortgage rates are near their lowest levels of the year.
According to Freddie Mac's weekly survey of more than 100 banks nationwide, the 30-year conventional fixed-rate loan is down to 4.01% -- more than one-half percentage point lower from the start of the year.
Conventional rates have dropped through 16 of the last 22 weeks. Refinance volume has increased as interest rates have fallen. Rates for FHA loans, VA loans and USDA loans are down big this year, too.
FHA mortgage rates have been, on average, 0.25 percentage points lower than comparable Fannie Mae- and Freddie Mac-backed loans since January; VA and USDA mortgage rates have been 0.375 percentage points lower.
And, now, consumers believe rates have bottomed.
According to Fannie Mae's monthly National Housing Survey, a survey for which the agency speaks with 1,000 households mixed between homeowners and renters, mortgage rate sentiment is decidedly negative.
Fannie Mae asks survey participants: "Do you expect mortgage rates to go up, go down, or stay the same in the next 12 months?" Only 6% say rates will drop.
Thankfully, consumers aren't always right.
Last November, for example, only three percent of those surveyed said rates would drop -- just 30 consumers out of 1,000. Meanwhile, as it turned out, these 30 consumers were right. Mortgage rates are currently 25 basis points (0.25%) lower today than they were one year ago.
For all the talk that "current mortgage rates can't stay low forever", they've certainly done so for a long time.
The expectation of rising rates may also be fueling consumer sentiment toward housing.
The Fannie Mae survey also showed 65% of respondents believing "now is a good time to buy a home". Rising rates can mean the difference between buying a 4-bedroom home or three-bedroom home; between a 3-bathroom home or a two-bathroom one; between living in a top-rated school district or a second-tier one.
When mortgage rates rise 1 percentage point, a buyer's maximum purchase price falls by 11%.
The September Fannie Mae survey shows U.S. consumers bullish on housing with 65% of those surveyed saying now is "a good time to buy a home".
It's not tough to see why.
As compared to two years ago, in many U.S. cities, home values are up more than 10 percentage points and the housing market's steady recovery has been a national news story since late-2012.
The hardest-hit cities of last decade's downturn have led this decade's rebound.
Phoenix, Arizona; San Francisco, California; and Los Angeles are three notable markets in which single-family home values have climbed by more than thirty percent from lows.
Condos in these markets have fared even better and there's hardly a housing metric which doesn't show solid annual growth.
Furthermore, with mortgage rates near 17-month bests, many U.S. lenders now quote rates in the 3s. Purchasing power is stretched and home affordability is high.
In addition, buyers have access to a multitude of low- and no-downpayment mortgage loans to help them with financing, including the 100% USDA mortgage, the no-money-down VA loan.
There's also the 3.5%-down FHA loan which, via Homeowners Armed With Knowledge (HAWK) program, will soon give first-time home buyers access to reduced FHA MIP.
Today's home buyers can afford 8% more home as compared to the start of the year.
Today's mortgage rates have dropped to near their lowest levels of the year. Many lenders now quote rates in the 3s and APRs are similarly low.
Compare current mortgage rates now. Rates quotes are available online at no cost, with no social security number required to get started, and with no obligation to proceed.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2014 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.