Mortgage Rates Could Be Locked In A “Downward Drift”

Mortgage Rates Holding On To 2017 Lows

Today’s mortgage rates are proving hard to budge.

Freddie Mac, in its weekly survey of more than 100 lenders nationwide, reported the average thirty-year rate rose 1 basis points (0.01%) to 4.16% this week.

Mortgage rates have moved within a 4-basis-point range over the past five weeks.

This is a welcome change of pace for home mortgage shoppers who, at times, felt rates might rise indefinitely.

It’s understandable.

In the eight weeks following the election, mortgage rates were up nearly 80 basis points, which included the 17th worst week for rates in history.

Today’s rock-steady interest rates present a rare opportunity to capture an affordable mortgage.

How The Weekly Freddie Mac Rate Is “Made”

Each week, mortgage agency Freddie Mac surveys 125 lenders nationwide for its Primary Mortgage Market Survey (PMMS), a snapshot of current mortgage interest rates.

It asks mortgage companies, banks, and credit unions, and other lenders their current rate for a well-qualified borrower putting 20% down, and paying “discount points,” or extra fees that directly reduce the rate.

The agency polls lenders Monday through Wednesday for its Thursday release.

This week, a number of factors held rates low.

The Federal Reserve released minutes from its January 31 meeting, which contained favorable news for mortgage rates.

The minutes did not present a case to dump mortgage-backed securities from the Fed’s portfolio, a move that would flood the market with supply, pushing up rates.

Today, recently sworn-in Treasury Secretary Steven Mnuchin said mortgage rates are likely to stay low for some time. Comments like this one from high-ranking officials tend to keep the market in check and help temper mortgage rate increases.

Rates are still holding to 2017 lows, and could be heading lower soon.

Is A Mortgage Rate “Correction” Coming?

Wall Street has been talking about rising rates for years.

In 2015, experts predicted much higher rates by year’s end. Rates only rose modestly. The same predictions arose in 2016. Instead, mortgage rates bottomed out near all-time lows.

As one would expect, analysts predicted higher rates in 2017. Of course, that was after the rampant post-election increase.

While dire predictions are circulating, mortgage rates have been remarkably tame in 2017 thus far.

Rates are down 16 basis points (0.16%) on average since the last week of December, and could be heading lower.

All markets experience “corrections” from time to time. The good news is that a correction doesn’t always have to be a bad thing.

A correction is simply a return to a sustainable level. Often, bubbles form — in the stock market, housing market, and the interest rate market, too.

The recent mortgage rate upheaval could be “overdone” at this point, and poised for a reversal.

In the long-term view of mortgage rates in the chart at the top of this article shows that huge mortgage rate ramps are typically followed by a long, steady drifts downward.

We could be in that “downward drift” stage now.

Rates are currently in the low-4s, but might not stay there for long. The high-3s are possible again as 2017 marches onward.

What would take us there? There are still plenty of geopolitical concerns, many of which resulted in low 2016 rates. None of those have been resolved yet, by the way.

Ongoing European Union upheaval and middle-east conflict are just two examples.

Plus, the “elephant in the room” is how Donald Trump’s policies will affect the economy, inflation, taxes, and a slew of other rate-influencing factors.

In short, 2017 could be a very good year for mortgage rate shoppers.

Different Mortgage Types Offer Different Rates

Freddie Mac requests conventional/conforming loan rates to arrive at its national average rate.

But it leaves out mortgage rates for government-sponsored programs that could come with even lower costs.

In today’s rising rate environment, a non-conventional loan could be the right decision for some homeowners.

Three loan programs in particular — the USDA home loan, VA mortgage, and FHA loan — are government-backed mortgages with rates in the 3s.

The USDA loan is available in less dense neighborhoods across the U.S. It offers zero down payment and lenient credit score minimums.

Eligibility is based, in part, on location of the home. Ninety-seven percent of U.S. land mass is eligible for a USDA loan, so homebuyers looking for housing outside of major metropolitan areas should check this option.

The zero-down VA home loan program comes with lower-than-conventional rates, according to loan software provider Ellie Mae, undercutting conventional loan rates by an impressive 25 basis points (0.25%).

Veterans with as little as 90 days of service history could be eligible for a VA loan.

With rates falling, the FHA loan rates are dipping into the high-3s. About forty percent of home buyers under the age of 37 buy their first home with FHA.

It’s no surprise.

FHA requires just 3.5% down and is very lenient about credit scores. According to a report released by Ellie Mae this month, 56% of FHA borrowers had a credit score between 600 and 699.

Only 16% of conventional loan applicants had similar scores.

The FHA home loan is the go-to program for home buyers without perfect credit profiles, little cash to put down, and the desire to become a homeowner as soon as possible.

Many lenders are offering these loan types at rates in the 3s, even as conventional rates are solidly above 4%.

What Are Today’s Mortgage Rates?

Today’s interest rates are still low, despite the post-election jump. Historically any rate in the 4% range was considered “too good to be true.” But those rates are still available.

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.