Brace Yourself for Mortgage Rate Increases in 2016

Fluctuating Mortgage Rates
Fluctuating Mortgage Rates

A 0.25% mortgage rate increase at the end of 2015 marks the beginning of what are expected to be multiple rate hikes from the Fed in the 2016 year. Effecting real estate trends across the board, the raise in the Fed Funds Rate is the first since 2008. For those planning to purchase a home or refinance a mortgage, the best rates of 2016 may be rapidly drying up.

The devil’s in the details…
While the Fed doesn’t control mortgage rates, changes in Fed policy effects consumer interest rates. Why? Mortgage rates are set by banks and Wall Street, who take their rate cues from the Fed. How will this affect potential clients – and you? Interest rates on savings will rise from nothing to a bit more than nothing, and the cost of credit (credit cards, car loans…) will rise with each hike.

Survey says:
A recent survey of more than 100 banks by government-backed Freddie Mac shows rates 30-year fixed-rate mortgage rates at 3.93% for borrowers willing to pay an accompanying 0.6 discount points; and, 15-year rates at 3.16% for borrowers willing to pay 0.5 discount points. For those preferring to ditch the discount, low-fours for a 30-year fixed and near 3.25% for a 15-year fixed.

Are we there yet?
David Lafferty, chief market strategist at Natixis Global Asset Management, expects two to three more hikes in real estate trends this year. Long-term interest rates aren’t, but Sean Becketti, Freddie Mac’s chief economist, expects 30-year rates to rise over 4% in early 2016, averaging 4.4% for the year.

For those who have not locked-in an interest rate or stalling on home purchases, a helpful shove in the right direction may be in order to convince potential buyers to grab on to rates while they’re at their lowest.

Stuck on zero? Get the help you need with the latest in real estate trends, only from Properties Online.

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