In 2015, mortgage ratesÂ moved within a fairly tight range.
At their lowest, conventional 30-year fixed-rate mortgage rates averaged 3.59%, according to Freddie Mac.Â At their highest, rates averaged 4.09%.
Not since 1998 have rates moved so little during a calendar year.
Stagnant mortgage rates have helped U.S. consumers -- especially first-time buyers.
As rents have climbed nationwide, mortgage payments have remained relatively stable, changing the math of "Should I rent or should I buy?"
Plus, with widespread availability of low- and no-downpayment mortgages, and with mortgage lenders approving home loans at a higher rate than during any period this decade, getting into a new home has become muchÂ simpler.
Mortgage lenders are getting easy on refinance loans, too.
Requests for theÂ FHA Streamline Refinance andÂ VA Streamline Refinance remained strong through 2015; and, as home values have climbed, cash-out refinance loans have come back into vogue.
It wasn't expected to be this way. At the start of last year, lenders and economists had predicted that mortgage rates would approach five percent; and that credit availability would tighten.
RatesÂ didn'tÂ reach five percent, though. RatesÂ spent all but eight weeks of 2015 in the 3s.
Looking ahead to 2016, what happens next is anyone's guess. Rates could follow the Fed Funds Rate higher, or they may buck their recent trend and reverse lower as the year progresses.
We spoke with a number of mortgage market experts to get their opinion on this year's rates.Click to see today's rates (Jan 23rd, 2017)
2016 mortgage rates will remain mostly unchanged in 2016, ending the year near 4.00%. Similar to 2015, rates will move within a tight range of less than 75 basis points (0.75%).
At no point in 2016 will mortgage rates move into the 5s. Rates are more likely to hit the mid-3s.Â Here's why.
First, despite several years of economic expansion, global economies remain weak, overall.
Neither China, Japan, nor Russia has shown sure signs of a breakout; and, Eurozone growth is still short of expectations Â These uncertainties will boost safe-haven buying, which benefits the mortgage-backed securities (MBS) market.
As MBS markets improve, mortgage rates drop.
A second reason whyÂ mortgage rates may not rise is that the Federal HousingÂ Finance Agency (FHFA) could begin rolling back loan-level pricing adjustments, which wouldÂ reduce consumer mortgage rates by as much as 150 basis points (1.50%), depending on the borrower.
And, third, U.S. lenders continue to transitionÂ to paperless transactions.
E-signatures and image-capture technologies shorten the number of days required to close a loan. Shorter closing times leads to lower mortgage rates.
Despite the above reasons, a "shock to the system" would nullify these points. This could come in the form of an unexpected policy change from the Federal Reserve policy, or rapid deterioration in the U.S. economy.
Mortgage interest rates will rise in 2016 and 2017 as the Federal Reserve acts on the long-expected effort to increase the short-term federal funds rate.
However, it is important to keep in mind that increases for short-term rates will be larger than the ultimate effect on mortgage rates.
In general, the typical 30-year fixed rate mortgage tracks the 10-year Treasury rate, which can be influenced by a number of economic factors.
For example, the U.S. economy is performing better than much of the rest of the world, which has the benefit of attracting foreign investment and holding down long-term rates. Inflation expectations also remain low, which also helps to hold down long-term rates.
Nonetheless, NAHB expects the average 30-year fixed rate mortgage to rise to above 4.50% for 2016 and to continue to increase in 2017.
While this will have some negative impacts on home buyers, the most significant constraint for prospective home buyers in recent years has been the challenge of accumulating a down payment.
This hurdle is one of the key reasons why the first-time home buyer share of new and existing home sales has been below historical levels for several years, and why multifamily construction growth has led the way over the past few years.
However, with continued job and wage growth, NAHB expects new single-family construction and sales to improve in 2016.
Home builder confidence is high, and consumer preference surveys continue to indicate that Millennials, like prior generations, want to become home owners.
Many of the so-called "experts" predict that in 2016, the Fed will begin to raise the discount rate at a measured pace as the economy shows few signs of inflation and continues to strengthen.
As the FedÂ starts to raise the federal funds rate, they usually make adjustments as to how quickly they raise rates based on continuing data coming in. If inflation comes in at a higher rate, they will raise more quickly.
If inflation appears tame, they may raise them at a measured pace.
As the discount rate rises I expect the mortgage rate trend to rise as well, but nothing that I would consider "dramatic" in 2016.
If mortgage rates spent 2015 in the "high-3s to low-4s" range, I would expect rates to be in the "low 4s to low 5s" in 2016.
If mortgage rates do indeed rise in 2016, I expect it to be mild enough to notÂ have a big impact on housing affordability, which means home prices will continue to appreciate slowly in 2016.
Bonus tip: Getting a mortgage today that is assumable with a historically low interest rate can be a useful tool when selling your home in a high-interest rate environment. Having a mortgage at 3.50% that a buyer may assume can be a very attractive selling-tool if/when the current 30 year interest rate is 8.50%.
Expect mortgage rates to travel mostly sideways during 2016, with a bit of an upward bias.
Most of the year should be spent in the 4s, with some potential to dip into the 3s, and a pretty firm ceiling around 5%.
The first Federal Reserve rate increases since 2006 will be a big topic, and so will be the lack of correlation between the Fed Funds/Prime rates and 30 year mortgage rates.
Watch for the projections of the pace of Fed rate increases to stretch out as the year goes on, as long as inflation data remains elusive and Asian and European economies deal with their own headwinds.
Having already reached the Fed's unemployment targets, monthly Jobs and GDP reports will be less likely than Inflation indicators (PCE and CPI) to create mood swings in the market for mortgage rates.
Until inflation targets have also been reached, the Fed will be cautious with the pacing of rate hikes.
Similarly, mortgage rates will be more sensitive to signs of inflation than they will be to Federal Reserve action if they believe the Fed is being overly preemptive.
Absent any significant new global issues, we expect all mortgage rates to be mostly firmer in 2016, especially later in the year. There are a number of reasons to expect this to occur:
The Federal Reserve will likely raise short-term interest rates two or three times, largely affecting initial interest rates for ARMs.
For fixed rate mortgages, more important than any given change in the federal funds is how the Fed characterizes the path of future policy moves. If small lifts in rates don't disturb or slow the economy much, the Fed will likely feel emboldened to make more regular or more sizable future changes.
Should this be the case, rates will tend to be higher as the year closes.
The Fed's cessation of using inbound proceeds from its massive holdings of MBS and Treasuries to buy more of them means a reliable buyer of debt will have left the market. This will serve to firm rates somewhat as well.
Moderate growth is expected for the U.S. economy, and we may start to see a little more inflation as the effects of low energy costs wane and labor markets continue to tighten.
Tempering of these upward pressures for rates should come in the form of fairly reliable demand for U.S. Treasuries from overseas investors, which tends to help anchor long-term interest rates.
The growing U.S. economy is likely to be joined by modest improvement in overseas economies, as central banks use QE-style programs to boost both economic growth and inflation.
How quickly these economies recover will impact rates, too; stronger growth there would tend to keep money at home rather than sending it to the U.S. for better returns.
We might see a maximum peak for rates over the course of 2016 of maybe 4.75 percent for conforming 30-year FRMs. Rates last approached this level back in 2013 and have not exceeded it since 2011.
Depending on how aggressively the Fed begins to move rates as the year progresses, ARMs may not move as much, and common 5/1 ARMs might see a peak of 3.75 percent or so.
In 2016, we should finally see mortgage rates moving up and staying higher over the long term as the Federal Reserve attempts to tighten monetary policy.
However, the Fedâ€™s moves will not likely result in direct and comparable increases in mortgage rates.
The bond market will likely move upward more slowly due to continued global economic weakness and contrasting monetary policies abroad.
We are forecasting the 30-year rate to move up by 60 basis points from where we are today, so ending 2016 near 4.65 percent.
Adjustable rate mortgages will move less, and consumers will likely opt to use more hybrid mortgages to mitigate the impact of higher rates.
Like this year, we expect rates to be volatile on a week-to-week and day-to-day basis as the financial market reacts to global economic news and tries to anticipate the Fedâ€™s moves.
The most-rate sensitive consumers could benefit from rate locks and float-downs.
A 60-basis point increase should not negatively impact the housing market, as consumers will have multiple tactics to mitigate some of that increase.
Also, given the expected massive amount of media attention on the Fedâ€™s moves, fence-sitting sellers and buyers should begin to understand that rates are moving higher and decide to jump into the market while they remain at such historically low levels.
Our forecast atÂ realtor.comÂ expects modest growth in sales nationally in 2016, making it the best year since 2006.Â But if rates move much more than we are anticipating, sales could suffer as higher rates drive debt-to-income ratios higher with all other factors equal.
Therefore, markets with the highest prices and already poor affordability will see that higher rates will result in fewer sales.
But across the US, the effect will be minimal, as the move to higher rates will spur more existing homeowners to sell and buy before rates go even higher.
In 2016 I believe that mortgage rates will remain pretty constant for the year.
The primary reason I predict this is I expect the millennials to make a large impact in the 2016 real estate market. Many millennials have substantial amounts of student loan debts and an increase in mortgage rates would all but eliminate them from being able to purchase a home.
Eliminating millennial buyers from real estate markets would lead to significant damage to housing markets across the country.
If there is to be an increase in mortgage rates this coming year, I believe it will not occur until the 2nd half of the year. Any increase will be marginal bringing the interest rates into the mid-4s.
Mortgage rates begin 2016Â higher than their year-ago level. How will rates look at the start of 2017? It's hard to know -- but there are a lot of educated guesses.
Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click to see today's rates (Jan 23rd, 2017)
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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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)