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Posted 07/08/2016

Mortgage Rates Defy Consumer Expectations Again; Rates Fall To New Depths

Fannie Mae National Housing Survey Consumer Expectations For Mortgage Rates

Consumers Mistakenly Bet Against Falling Rates

U.S. consumers expect today's mortgage rates to rise over the next 12 months.

According to Fannie Mae's most recent National Housing Survey, 46 percent of consumers think mortgage rates will be higher one year from today. About half believe rates will hold near their current range.

The survey, which covers 1,000 households, is meant to measure changing consumer attitudes toward mortgages and housing nationwide.

June's report showed that only 5% of those surveyed expect mortgage rates to drop.

As a home buyer or existing homeowner, though, you'd do well to ignore public opinion.

The same survey at the beginning of 2016 reported that nearly 60 percent of respondents predicted higher rates this year.

The opposite happened.

Since the start of the year, 30-year mortgage rates have dropped 56 basis points (0.56%), representing $100-per-month savings on a mortgage amount of $300,000.

The nationwide average mortgage rate now stands at 3.41%, floating just above all-time lows achieved in November 2012.

More than 7 million homeowners are potentially eligible to refinance and refinancing households will save more than $5 billion collectively between now and next year, and those numbers are rising.

Click to see today's rates (Jul 30th, 2016)

30-Year Mortgage Rates Drop Near All-Time Low

For homeowners, a refinance makes more sense by the minute.

Rates are falling, pushed downward by a continuous string of rate-favorable news, the most notable of which being "Brexit," or Britain's vote to exit the European Union.

The move shocked world markets, and rates sank.

Mortgage lenders are now quoting 30-year fixed rates approaching 3.25% for well-qualified applicants, and fifteen-year loans are in the 2s.

Rates are so good, in fact, that there was only one other time in history when rates were better -- and then, only slightly. Homeowners are taking advantage. They are converting their 30-year fixed mortgages to 15-year loans with only modest increases in their payments each month.

And, as home prices rise, households are tapping into their newfound equity with a cash-out refinance to pay off high interest rate college loans, credit cards, and other debt, at very low interest rates.

If you've been considering a refinance for any purpose, now is the time to check rates.

Click to see today's rates (Jul 30th, 2016)

Consumers Expect More Home Price Gains In 2016

It's not just higher mortgage rates that consumers predict for 2016. They also expect home prices to rise.

According to Fannie Mae, 91 percent of consumers think home prices will rise or hold steady this year.

But rising home prices are not distinguishing renters' desire to buy. Quite the opposite. Consumers expect home prices to rise at least 2% over the next twelve months. A $300,000 home will be worth six thousand dollars more one year from now, say survey takers.

That's one incentive to buy now. The other is the amount consumers expect rent to increase: 3.6% over the next year.

Renters can either be on the winning or losing side of rising housing costs. According to Fannie Mae's survey, they are choosing to win.

Sixty-three percent of consumers say they would buy instead of rent, if they had to move today.

That would be a wise choice. Home sales remain near their strongest levels in eight years and supplies of homes are scarce. With mortgage rates touching all-time lows, demand is expected to remain strong, too.

Short supplies and surging demand spells higher prices ahead. Waiting to buy a home could be an expensive proposition for today's would-be buyers.

Click to see today's rates (Jul 30th, 2016)

Mortgages That Are Helping Buyers Secure Affordable Housing

Existing homeowners aren't the only ones benefiting from low rates.

Home buyers are getting into homes for less money per month than they pay for rent. Near-record-low rates are increasing home affordability for first-time home buyers.

Maybe you've been thinking about buying a home, too. After all, the market looks ripe.

Mortgage rates are low, rents are rising nationwide, and mortgage lenders are approving more loans. Furthermore, there's an abundance of low- and no-down payment mortgage loans for first-time home buyers and repeat buyers alike.

Among the most common low-downpayment mortgage options is the Conventional 97, which has a three percent downpayment requirement, and which allows downpayment funds to come from a gift.

Mortgage rates for the Conventional 97 are best for borrowers with strong credit. For buyers whose credit scores is not so strong, the FHA 3.5% downpayment program typically works best.

Via the FHA home loan, which is sometimes known as the FHA 203(b), home buyers can make a downpayment of 3.5 percent on a home so long as the home will be a primary residence.

FHA loans can be used for homes with up to four units (e.g. a four-plex) and the program allows a buyer to have its closing costs paid by the seller of the home.

The HomeReady™ mortgage is another low-down payment option, allowing a down payment of just three percent for qualified buyers. HomeReady™ is generally reserved for low-to-moderate income households, but the program can be used by anyone.

Learn about the HomeReady™ mortgage program here.

Today's home buyers have several no money down options, too.

The VA loan is a no-money-down loan, available to military borrowers and surviving spouses. The advantages of a VA loan are that there's no requirement to pay mortgage insurance, which keeps loan costs down; and that VA loans are assumable, which means that future home buyers may be eligible to "assume" your home's existing mortgage rate.

In a rising mortgage rate world, assumable loans can be a giant sales benefit.

Another zero down payment loan is the USDA loan.

Available in less-densely populated neighborhoods, the USDA loan allows for 100% financing and very low rates of mortgage insurance. USDA loans are available as 30-year, fixed-rate home loans only.

Lastly, via down payment assistance programs, home buyers can receive a cash grant to cover their traditional home down payment. Such programs don't always require repayment, either. In many cases, you're only required to maintain your residence for a period of up to 5 years.

This flowchart can help you decide which mortgage is best for your needs.

What Are Today's Mortgage Rates?

Consumers think mortgage rates will rise through the remainder of 2016 and into 2017. But their prediction is likely off, if history is an indicator. Mortgage rates have defied expectations this year, and it seems almost nothing can lift them from recent depths.

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 (Jul 30th, 2016)

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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2016 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)