Mortgage Interest Rates Reverse Course in 2017

Mortgage Interest Rates Reverse Course in 2017 | MyKCM

To start the year, housing experts all agreed on one thing: 2017 was going to be the year we would see mortgage interest rates begin to rise. After years of historically low rates, and an improving economy, the question wasn’t if they would increase but instead how much they would increase. Some thought we could see rates hit 5-5.5% by the end of the year.

However, the exact opposite has happened. Instead of higher rates as we head into the middle of 2017, we now have the lowest rates of the year (as reported by Freddie Mac). Here is a graph of mortgage rate movement since the beginning of the year:

Mortgage Interest Rates Reverse Course in 2017 | MyKCM

Projections still call for an increase…

Four major entities (Freddie Mac, Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors) are still projecting that rates will increase by the fourth quarter of the year.

Mortgage Interest Rates Reverse Course in 2017 | MyKCM

Bottom Line

No one knows for sure where interest rates will be in six months. However, if you are thinking about buying your first house or trading up to the home of your dreams, you can still get a mortgage at historically low rates RIGHT NOW.

Do You Know the Cost of Waiting?

Do You Know the Cost of Waiting? [INFOGRAPHIC] | MyKCM

Some Highlights:

  • The “Cost of Waiting to Buy” is defined as the additional funds it would take to buy a home if prices and interest rates were to increase over a period of time.
  • Freddie Mac predicts that interest rates will increase to 4.8% by this time next year, while home prices are predicted to appreciate by 4.9% according to CoreLogic.
  • Waiting until next year to buy could cost you thousands of dollars a year for the life of your mortgage!

Slaying Home Buying Myths

Slaying Home Buying Myths [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • Interest rates are still below historic numbers.
  • 88% of property managers raised their rent in the last 12 months!
  • The credit score requirements for mortgage approval continue to fall.

Mortgage Interest Rates Went Up Again… Should I Wait to Buy?

Mortgage interest rates, as reported by Freddie Mac, have increased over the last several weeks. Freddie Mac, along with Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors, is calling for mortgage rates to continue to rise over the next four quarters.

This has caused some purchasers to lament the fact they may no longer be able to get a rate below 4%. However, we must realize that current rates are still at historic lows.

Here is a chart showing the average mortgage interest rate over the last several decades.

Mortgage Interest Rates Went Up Again… Should I Wait to Buy? | MyKCM

Bottom Line

Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.

Will Increasing Mortgage Rates Impact Home Prices?

Will Increasing Mortgage Rates Impact Home Prices? | MyKCM

There are some who are calling for a decrease in home prices should mortgage interest rates begin to rise rapidly. Intuitively, this makes sense as the cost of a home is determined by the price of the home, plus the cost of financing that home. If mortgage interest rates increase, fewer people will be able to buy, and logic says prices will fall if demand decreases.

However, history shows us that this has not been the case the last four times mortgage interest rates dramatically increased.

Here is a graph showing what actually happened:

Will Increasing Mortgage Rates Impact Home Prices? | MyKCM

Last week, in an article titled “Higher Rates Don’t Mean Lower House Prices After All, the Wall Street Journal revealed that a recent study by John Burns Real Estate Consulting Inc. found that:

“[P]rices weren’t especially sensitive to rising rates, particularly in the presence of other positive economic factors, such as strong job growth, rising wages and improving consumer confidence.”

Last week’s jobs report was strong and the Conference Board just reported that the Consumer Confidence Index was back to pre-recession levels.

Bottom Line

We will have to wait and see what happens as we move forward, but a decrease in home prices should rates go up is anything but guaranteed.

Mortgage Interest Rates Just Went Up… Should I Wait to Buy?

Mortgage Interest Rates Just Went Up… Should I Wait to Buy? | MyKCM

Mortgage interest rates, as reported by Freddie Mac, have increased over the last several weeks. Along with Freddie MacFannie Mae, the Mortgage Bankers Association and the National Association of Realtors are all calling for mortgage rates to continue to rise over the next four quarters.

This has caused some purchasers to lament the fact they may no longer be able to get a rate less than 4%. However, we must realize that current rates are still at historic lows.

Here is a chart showing the average mortgage interest rate over the last several decades.

Mortgage Interest Rates Just Went Up… Should I Wait to Buy? | MyKCM

Bottom Line

Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago; a lower rate than your parents did twenty years ago and a better rate than your grandparents did forty years ago.

Why Are Mortgage Interest Rates Increasing?

Why Are Mortgage Interest Rates Increasing? | MyKCM

According to Freddie Mac’s latest Primary Mortgage Market Survey, the 30-year fixed rate mortgage interest rate jumped up to 3.94% last week. Interest rates had been hovering around 3.5% since June, and many are wondering why there has been such a significant increase so quickly.

Why did rates go up?

Whenever there is a presidential election, there is uncertainty in the markets as to who will win. One way that this is noticeable is through the actions of investors. As we get closer to the first Tuesday of November, many investors pull their funds from the more volatile and less predictive stock market and instead, choose to invest in Treasury Bonds.

When this happens, the interest rate on Treasury Bonds does not have to be as high to entice investors to buy them, so interest rates go down.  Once the elections are over and a President has been elected, investors return to the stock market and other investments, leaving the Treasury to raise rates to make bonds more attractive again.

Simply put, the better the economy, the higher interest rates will go. For a more detailed explanation of the many factors that contribute to whether interest rates go up or down, you can follow this link to Investopedia.

The Good News

Even though rates are closer to 4% than they have been in nearly 6 months, they are still slightly below where we started 2016, at 3.97%.

The great news is that even at 4%, rates are still significantly lower than they have been over the last 4 decades, as you can see in the chart below.

Why Are Mortgage Interest Rates Increasing? | MyKCM

Any increase in interest rate will impact your monthly housing costs when you secure a mortgage to buy your home. A recent Wall Street Journal article points out that, “While still only roughly half the average over the past 45 years, according to Freddie Mac, the quick rise has lenders worried that home loans could become more expensive far sooner than anticipated.”

Tom Simons, a Senior Economist at Jefferies LLC, touched on another possible outcome for higher rates:

“First-time buyers look at the monthly total, at what they can afford, so if the mortgage is eaten up by a higher interest expense then there’s less left over for price, for the principal. Buyers will be shopping in a lower price bracket; thus demand could shift a bit.”

Bottom Line

Interest rates are impacted by many factors, and even though they have increased recently, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.