If you are in the real estate business or you are a homebuyer, mortgage rates are inevitably important to you. In fact, according to realtor.com, 86 percent of buyers financed their home using a mortgage last year. Mortgage rates this year were low, but have gone up during the last two weeks. The rates are roller coaster-ing. They have had 23 down days, 17 up, and 5 flat. However, realtor.com’s chief economist Jonathan Smoke attempted to predict the upcoming future of mortgage rates as peak buying season approaches.
Three Possibilities for the Future of Mortgage Rates
Smoke admitted that there is not one clear consensus to reach about the future of mortgage rates. He instead discussed three possibilities.
“The first path sees the economy as hobbled by global economic weakness and the decline in the price of oil. As oil declined in January and early February, the stock market followed, and global money sought refuge in the dollar and U.S. Treasury bonds. As demand for bonds goes up, so does their price, and mortgage rates move in the opposite direction,” Smoke wrote.
In this situation, mortgage rates would stay close to where they are now, around 3.8 percent.
“According to the second scenario, rates and financial markets have overreacted to the global economic concerns, but the global weakness will limit the growth we can see in 2016. This moderate view of growth would see the average 30-year fixed rate get back above 4% by the third quarter and reach 4.2% by year-end,” Smoke wrote.
In his last scenario, inflation increases faster leading the Fed to raise rates.
Not comforted by three possibilities? Smoke also gave the average of these three for a more comprehensive prediction.
“If you want a single forecast, take the average of these scenarios. This view would see the 30-year fixed conforming rate reaching 4.22% by the end of this year. That would be almost 50 basis points above where we are today, giving credence to moving fast and exploring options like rate locks along the way,” Smoke concluded.
The future of mortgage rates is hard to predict and has a large effect on buying power. If you have any questions about these rates and how they could effect your purchase, contact a RE/MAX Paradise agent today!