Mortgage rates expected to exceed 6% – what’s next?

Green Escrow | Real Estate News

As the U.S. Federal Reserve is expected to raise interest rates in response to continuing high inflation, most analysts believe mortgage rates will exceed 6 percent by the end of the year, if not sooner.

Just a year ago, mortgage rates stood at 2.88 percent and, as of the week of September 8, are now 5.89 percent. Many buyers are leaving the market, meaning sellers will have to make adjustments – primarily lowering their asking price.

Analysts also worry that continued rate hikes will push the country closer to a recession.

As interest rates inch up, loan applications inch down

Green Escrow Services | Adding value to home

According to a report by the Mortgage Bankers Association, loan applications for both purchases and refinancings dropped by 0.2 percent in April and are down by 0.8 percent from 2017.

The 30-year-fixed-rate mortgage rate reached an average of 4.73 percent, which is the highest since September 2013.

Refinance applications, which are typically the most sensitive to interest rate changes, are down 16 percent as compared to 2017.

More Homes Have Positive Equity

Green Escrow Services | Adding value to home

A recent report by CoreLogic states that nation-wide 47.9 million home – or 93.7 percent of those having a mortgage – now have positive equity.

Moreover, 95.2 of California homeowners have positive equity and San Francisco leads the nation with 99.4 percent as of the third quarter, 2016.

Of course, equity gains are due in large part to continually rising home prices – certainly a constant in the Bay Area – but also to favorable mortgage rates.

The report notes that mortgage rates remain relatively low but have risen for six consecutive weeks since the presidential election as are expected to continue to raise, particularly if the Federal Reserve raises interest rates next week.

“Brexit” and Interest Rates

Green Escrow | Real Estate News

Now that “Brexit” is an historical fact, many analysts see the possibility for interest rates to sink to record lows in the coming weeks. Currently 30-year fixed-rates on home loans are near 3.7 percent. While there may be a brief dip soon, some experts predict rates will continue the upward trend to near 4 percent by the year’s end.

Other analysts argue that the Britain’s exit from the European Union may have a longer-term impact on Treasury rates.

Either way, homeowners interested in refinancing will see “Brexit” as beneficial to their efforts, at least in ther short-term.

The Fed Is Raising Rates – But When?

Green Escrow Services | Federal Reserve Board

They keep telling us – the Federal Reserve Board is raising rates this year but by not announcing when they are making the markets nervous as to what comes next.

Here the Fed is providing a few clues to calm the nervous markets as Chairwoman Yellen announced last month that the Fed would not “be impatient” with their moves because “if underlying conditions had truly returned to normal, the economy should be booming.”

In other words, interest rates may indeed rise but we shouldn’t see any significant higher rates anytime soon.

And that’s – most probably – a good thing.