Thinking hard about buying a home? Youâ€™re likely keeping a close eye on mortgage rates, which in part determine how much home you can afford. After all, when rates go up, purchasing power goes down.
The good news is that mortgage rates remain close to historical lows. The not-so-good news is that many expect rates to be higher by the end of 2017. But itâ€™s impossible to accurately predict rates. And a lot can change between now and the end of the year. Government policies, market conditions, world events and other issues can cause rates to rise or fall.
To get a better feel for where rates may be headed over the next nine months, I asked a group of industry experts to assess the current rate climate and chime in with their predictions.Click to see today's rates (Mar 26th, 2017)
According to the Federal Reserve Bank of St. Louis, the average 30-year fixed mortgage rate was 3.54 percent just before last Novemberâ€™s election. Rates crept up in the weeks that followed, hitting 4.25 percent at the start of 2017. But theyâ€™ve gradually ticked down since then. In the first week of March, they hover just below 4 percent.
This was slightly surprising to some, given that the Federal Reserve raised rates, by 0.25 percentage points in late December, for only the second time in a decade.
â€śRates have taken a roller coaster ride ever since the election,â€ť says Steve Quarles, president of Peachtree Home Loans in Alpharetta, Ga. â€śBut the rate rise we saw was mostly due to political uncertainty. Then, market conditions stabilized, so rates have slowly crept back down.â€ť
However, the Fed has announced that it may boost rates at a quicker pace in 2017. Fed officials project three modest rate hikes this year.
â€śAnother rate hike could happen as early as the next Federal Reserve meeting on March 14,â€ť notes Joe Melendez, CEO of ValueInsured in Dallas.Click to see today's rates (Mar 26th, 2017)
Ask J. Keith Baker, mortgage banking professor at Irving, Texas-based North Lake College, and heâ€™ll tell you the 30-year rate may rise by at least a half percentage point by mid-year, taking us to around 4.50 percent, on average.
â€śThey could go as much as one percent higher than they are now if the economy continues to grow by yearâ€™s end,â€ť says Baker.
Ben Robinson, director of secondary marketing for Sindeo in San Francisco, echoes that sentiment.
â€śI expect rates will move up slowly but steadily throughout the year. They could potentially push closer to 5 percent by the end of this year,â€ť says Robinson.
Sahil Gupta, co-founder of San Francisco-based Patch Homes, foresees 30-year and 15-year fixed rates landing near 4.50 percent and 3.30 percent, respectively, by 2017â€™s midpoint.
â€śBut by yearâ€™s end, I expect those respective rates to be around 4.80 and 3.70 percent,â€ť says Gupta.
Melendez is slightly more optimistic. He doesnâ€™t think the 30-year mortgage will exceed 4.5 percent by the close of 2017.
Randall Yates, CEO of Dallas-headquartered The Lenders Network, agrees.
â€śI believe rates will be around 4.50 percent for the 30-year fixed and in the high threes for 15-year fixed-rate loans,â€ť Yates says.
The consensus opinion? Prepare for rates slowly going up, unless something unforeseen happens.
Gupta says that Fed rate hikes, combined with inflation and employment numbers, are probably the biggest factors that will affect mortgage rates this year.
â€śSecondary factors are linked to the fiscal policy of the Trump administration,â€ť adds Gupta. â€śIf we see significant infrastructure spending in 2017, that could boost prices in parts of the country where spending and investments are concentrated. Likewise, asset inflation would be expected to rise, which gives the Federal Reserve an opportunity to raise rates.â€ť
Yates notes that rates could also head north â€śif home prices increase quicker than expected.â€ť
Returning government-controlled mortgage companies Fannie Mae and Freddie Mac to private control, as President Trump wants to do, could further affect rates, Baker believes.
â€śThis transition might not go smoothly. And without direct government backing, it might lead to higher mortgage rates,â€ť says Baker.
â€śWe also cannot discount the political and financial turbulence in Europe. With the upcoming elections for some of the major European Union powers, any major shocks could cause a flight back to the safe haven of U.S. Treasuries,â€ť says Robinson, noting that as yields on Treasury bonds, bills and notes increase, so do interest rates.Click to see today's rates (Mar 26th, 2017)
With interest rates and home prices expected to climb gradually over the coming months, you may want to act soon on a mortgage.
â€śI cannot stress enough that mortgage borrowers should lock in rates now. I do not see them going down in 2017,â€ť says Michael Foguth, founder of Foguth Financial Group in Brighton, Mich.
While no one can perfectly time rates, Melendez recommends pulling the trigger before the Federal Reserve meets on March 14.
â€śI would advise borrowers to watch for a possible dip in rates and quickly lock in,â€ť says Melendez.
Although itâ€™s important to watch rate movements, â€śdonâ€™t let them dictate your behavior when it comes to buying a home. Every scenario is different,â€ť says Robinson. â€śSo be sure to talk to an experienced mortgage professional about your needs.â€ť
To increase your chances of scoring the lowest possible rate on a mortgage, Robinson suggests aiming for a:
Making yourself a better borrower should get you a better rate.
Current mortgage rates are lower than they were immediately following the 2016 election. However, most experts expect them to rise as the year plays out.Click to see today's rates (Mar 26th, 2017)
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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)