It is a misconception that Federal Reserves has a large effect on the mortgage market. The fact is that mortgage rates have more correlation with the bond market. It’s currently projected that the mortgage rates will stay low until 2020, possibly 2021. On October 3rd, Freddie Mac reported an average 3.65% on the thirty-year loan, dropping 1.06% from the same time last year. According to forecasts from Freddie Mac, Fannie Mae and the Mortgage Bankers Association (MBA), this trend will continue for quite a while; with Fannie Mae going as far to predict rates such as 3.4% in 2020. These rates reflect quite favorably on the public, with the MBA projecting a 133% increase in refinancing activity over last year’s data. Freddie Mac believes that this surge of refinancing will continue in the near future.
One thing to watch out for as consumers is the predicted slowing of home price growth. All three of the above organizations believe that home prices will slow to a stop at 2.2% appreciation in 2021, so plan your sales accordingly. The data backs this claim as well, with the July 2019 growth rate at 5% and last year’s growth rate at 6.7%. As Bob Broeksmit, MBA president and chief executive said, “The outlook this fall looks good for prospective home buyers. Borrowing costs are significantly lower than last year, single-family construction has increased for four straight months, and the healthy job market is boosting household confidence.” If you are looking to purchase a home, this is a great time to be able to afford a home which may be out of your price range last year.
