Contrary to various Wall Street predictions, mortgage rates are not expected to rise in 2016. In fact, 30-year mortgage rates are expected to top off at 5% and hover around the 4% level for the rest of the year. They recently reached their lowest point in May, closing out at 3.66%. This has prompted a large volume of refinancing applications. As a home owner, it is important to be aware of potential changes to your mortgage. Use this post to educate yourself on what experts forecast for the coming year. Here are a few mortgage rate predictions for 2016.
Mortgage Rates Will Hover Around 4%
Mike Fratantoni, chief economist Mortgage Bankers Association, recently stated that he expects mortgage rates to hover around 4% for the next year. He also claims that there will likely be two rate hikes this year, and four per year onward. This is in anticipation of Federal Reserve interest rate hikes, which are due within the next few months. However, even with the rate hikes, mortgage rates are not expected to skyrocket. Experts expect mortgage rates to level off at around 4.65% until this time next year. This is one of the primary mortgage rate predictions of 2016.
Adjustable-Rate Mortgages Will Increase
Frank Nothaft, chief economist at CoreLogic, agrees that mortgage rates will remain at its current low. Concurrently, he believes that adjustable-rate mortgage usage will increase. He claims that hybrid adjustable-rate mortgages, like the 10 or 7 year variety, will become more common. This is due to the fact that they allow for more flexibility. The adjustable rates can help offset upcoming rate hikes and allow home owners to take advantage of the current low rates. This is one of the most important mortgage rate predictions for home owners looking into adjustable-rate mortgages.
Better Employment Will Be Bad For Mortgage Rates
Employment rates and salary growth have an effect on mortgage rates. Specifically, better employment rates and higher salaries mean more consumer spending. More consumer spending leads to inflation, which can lead to an increase in mortgage rates. This is troubling. 13 million jobs have been added to the economy since 2010. Unemployment rates have dropped, as well. Thus far, wage growth has not had an enormous impact on inflation. However, economics expert are being cautious about the workforce’s affect on mortgage rates. Keep this in mind as one of the more volatile mortgage rate predictions.
The World Economy Will Affect Mortgage Rates
Weakening non-U.S. economies are expected to affect mortgage rates positively. This is due to the “flight to quality” effect, which occurs when investors seek safer investment options due to economic uncertainty. U.S. mortgage bonds are considered some of the safest in the world. Thus, mortgage rates tend to fall when countries like China face political or economic turmoil. Investment in the U.S. dollar has been increasing, as well. This helps drop mortgage rates even further. World economies lowering U.S. mortgage rates is a major prediction that may benefit a lot of home owners.
Home owners need to be well-informed about mortgage rate forecasts. Several predictions are being made about mortgage rates hitting low to manageable rates for this year onward. You can take advantage of this situation by refinancing your mortgage. This can lead to lower payments overall. It can also help offset any rate hikes that might occur in the future. Study the mortgage rate predictions in this post closely. Hopefully, they can help you make better financial decisions.
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