What’s going to happen to mortgage rates in 2016? Lots of people, very smart people try to anticipate what is coming. We are well aware that they don’t always get it right, but the more we know the better prepared we can be. Loan Rates Have Been Crazy! A quick look at Freddie Mac’s history reveals that it has been more than five years since monthly average rates for 30-year fixed-rate mortgages (FRMs) topped 5 percent. At one point, at the end of 2012, they reached an all-time low of 3.35 percent. Right now they are still very close to that 3.35 percent and have yet to hit 4. How quickly these low rates have become the norm! But don’t forget what normal used to be. If you look back over the decade before the housing and lending crisis really hit in 2008, the average annual rate for a fixed rate mortgage was over 6 percent for seven of the 10 years. In 2000, it was 8.05 percent. That sounds bad, but once again….remember the 80’s….. In 1981, the annual percentage rate average was more than twice that at 16.63 percent. Interest rates were above 10 percent from 1979 – 1990. Don’t let those rates scare you. I have yet to find an economist that expects mortgage rates to rise to those levels again anytime in the near future. So When Will “Normal” Return? There are just too many variables to predict that with any accuracy at this point. The election, oil prices, stock activity and so much more can all make an impact and none of which at this point can accurately be predicted into the far future. What Experts Forecast for 2016 Fannie Mae and the Mortgage Bankers Association (MBA) both have teams of economists dedicated to researching and forecasting trends in housing, including current mortgage rates.(Thank goodness for them…that means we can listen to what they say rather than doing our own research!) The MBA team expects average rates for 30-year fixed rate mortgage to hit 5.1 percent in the last quarter of 2016. It anticipates fairly small increases through 2016’s quarters: Q1 4.4 percent; Q2 4.7 percent; Q3 4.9 percent; Q4 5.1 percent. Fannie Mae however forecasts much smaller rises in current mortgage rates with forecasts much smaller and shallower rises, with only 4.2 percent in the last quarter of 2016. Q1, 4.1 percent in Q2 and 4.2 percent in both Q3 and Q4. So Who’s Right? So we know that both of these research teams are incredibly intelligent and the fact is either could be right (or both could be wrong). Even the Federal Reserve will not confidently predict when its own rates will rise, and it sets those itself. Most experts and economists currently expect to see some rises between now and the end of 2016. However, a few reckon it could be a long time before we get back to normal levels. One, Deutsche Bank equity strategist David Bianco, wrote in early October, “We see a better chance of landing men on Mars before a full normalization of nominal and real interest rates, especially 10-year yields, to historical norms.” What to Watch For Usually, good economic data causes rates to rise, while poor numbers pull the rates down. In particular, low unemployment and inflation at around 2 percent are important, because those are the main criteria the Fed looks at when setting its rates. But good numbers regarding gross domestic product (GDP), incomes, manufacturing, consumer confidence and spending, and so on are all likely to see rates rise sooner and faster. Poor ones generally have the opposite effect, as does bad news about foreign economies. What happened in Greece this past year definitely helped to keep our rates low! What’s going to happen to current mortgage rates in 2016? The short answer is nobody can be sure. If you’re reading this because you need to make an important decision (time the purchase of a home, perhaps, or decide when to refinance an adjustable rate mortgage, we haven’t been much help. However we have given you the signs to watch for! Rates now are still low so it is a great time to buy a home and lock yourself in at those low fixed rates. The team at Foran Realty would be happy to help you with your home search needs on Cape Cod. https://www.lendingtree.com/mortgage-rates/mortgage-rates-what-to-expect-in-2016-article ]]>