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Mortgage rates stay low, but experts are predicting volatility this year

Mortgage rates stay low, but experts are predicting volatility this year

Last December, when real estate experts began issuing their predictions for where the nation’s housing market was headed in 2017, there was a clear sense that mortgage rates could become a factor.

After years of historically low interest rates, there was a feeling that mortgage rates could become more volatile this year, and start to rise.

So has that prediction come true?

First, take a look back at 2016. By the end of the year, mortgage rates had increased by .25 percent. That might not sound like a lot, but it was only the second hike in a decade.

And this year, experts are predicting the Federal Reserve will increase interest rates as the economy gets stronger and the unemployment rates falls to historic lows. Higher interest rates would definitely impact mortgage rates. But is that definitely where we’re headed?


Volatile predictions

By historic standards, mortgage rates in 2016 remained low. Just the same, there are expectations for more movement this year.

In December, the Federal Reserve hiked short-term interest rates to between 0.50 percent and 0.75 percent. It didn’t have much impact on mortgage rates, although it did mark just the second hike in a decade.

The predictions that rates would jump were based on assumptions that the Fed would hike interest rates two more times in 2017.

On the other hand, the sense that what goes down must eventually come up didn’t prove to be very accurate in 2016.

Early in 2016, mortgage rates started out at around 4 percent, fell slightly by 0.5 percent, never rose much throughout the rest of the year, until November.

For 2017, the expectation was that the historically low nature of these rates, combined with a growing economy, made it highly unlikely that rates would drop. So the question is, will they stay the same, or climb?

That’s a subject that’s still up for debate.

There’s no question that low interest rates are great news for prospective home buyers. And there are some predictions that rates could not only stay low, but actually drop.

Longforecast.com, which does long-term economic forecasting, has predicted that mortgage rates will remain below 3.5 percent this year.

Likewise, Kiplinger, which does business forecasting, believes interest rates will stay low, and only start to move if inflation heats up.


Time to Act – or Wait?

Low interest rates have helped fuel this strong housing market, making it more affordable for buyers to secure a 30-year fixed mortgage. But there’s no guarantee that rates will stay low.

So, should prospective buyers lock in a low rate now, or take their chances down the road?

There’s no question that home prices are rising, and will continue to do so, as a strong jobs market in Florida and across the nation has drawn more millennials into the market. A low inventory has helped sellers get higher prices.

With no indication that this is about to change anytime soon, prospective buyers are well advised to act now, and not wait, since prices are only heading in one direction – up.

The same is true for mortgage rates. They’re still historically low now – but nobody is certain that’s going to last.

Consider that even a small price increase, combined with an interest rates that’s slightly higher than today, could add thousands of dollars to what a buyer pays on their new home. The math is clearly with adding a sense of urgency to their home buying plans.

Locking in a low mortgage rate now rather than later makes the most sense.



Rates for mortgages stay in a constant state of flux. The Mortgage Bankers Association just increased its mortgage rate predictions and forecast for 2017. MBA analysts now expect that the average rate for a 30-year fixed home loan will rise in the second half of the year, possibly to 4.7 percent. That’s up from 4.3 percent today.

And keep in mind that mortgage rates around 7 percent are far closer to the historical norm.

Lower mortgage rates have helped homeowners refinance and reduce their monthly payments, but they also help homebuyers save thousands of dollars each month if they get a good fixed rate.

At AV Homes, we’re here to help home buyers find their dream home, and to do it in some of Florida’s most attractive communities. Whether you’re looking to buy your first home, or if you’ve sold your house up north and have recently moved to Central Florida, AV Homes can offer you brand new houses in neighborhoods that are close to Orlando and the theme parks.

It’s smart to act quickly, though. Buyer demand is high and with inventory still low, prices have been rising.

It’s quite possible that interest rates will head upward as well.

Prospective buyers would be smart to avoid delaying their search, since it’s entirely possible that by the fall, it could be even more expensive to purchase a home.