Mortgage Rate Outlook 2018

Almost nothing effects the housing market more directly than the mortgage interest rate. This sole factor often determines whether you can afford a house or not. Simply put, the interest rate is how much you will pay a lender in order to borrow money. It is a finance charge for the loan you have taken out on your house, and it is always reflected as a percentage of the total loan…

Mortgage Rate Outlook 2018

Interest Rate Basics

The tricky thing about interest rates is they are constantly changing. They can fluctuate daily similar to the stock market. This can be frustrating to some borrowers, but it does present opportunity. Like the stock market, smart investors can wait and invest in a home at a time which will benefit them the most. If you lock in a low interest rate, it will remain low for the life of the loan. So even if interest rates were to skyrocket a week later, you would still be paying the low price you locked in with a fixed rate mortgage.

Learn more about Interest Rates here

2018 Forecast:

Nobody has a crystal ball that will tell them exactly what will happen with the interest rate. However that are many ways that you can predict how the market will act. We have listed some of the most significant factors that will affect the mortgage rate outlook for 2018:

Mortgage Rate over the years


Rates Are On The Rise:

 The Federal Reserve raised interest rates again on March 21. This is only the sixth time they have risen rates since the end of the Great Recession. While this alone does not determine interest rate, it does have a large effect on them. According to TheMortgageReport.com,

“Markets look to the Fed like an outdoor wedding planner tunes in to the weatherman.”

Regardless of the FED’s impact, rates have been ticking up higher and higher in the past 6 months.

Reasons For The Rise:

Thriving Economy:

The economy has made a near full recovery since the market collapsed in 2008. Unemployment rates around 4% nationwide, one of the lowest in history. Coupled with a bullish stock market and a booming housing market,  the US economy has been very strong as of late.

Fed Influence:

              Historically when our economy is thriving, interest rates go up. This is because the Federal Reserve is trying to prevent inflation. Interest rates usually rise when the economy is doing this well. During the last boom in 2007, interest rates were as high as 6.75%. The .com boom before that in 1999 had average rates above 8%. The FED has a very positive outlook for our economy this year. Which means we should expect FED rates to rise. 

Rates Just Broke A 4 Year High

Since 2014, borrowers have enjoyed low and steady rates that have stayed before 4.45%. This all changed at the end of March 2018 when rates broke the 4 year high. They have since dipped slightly back below these highs, however many analysts consider this to be strong sign rates will continue to climb.

Rates Are Not Scheduled To Go Down

The FED is planning on making up to 3 more increases this year alone. This has caused many hesitant home buyers to finally take the plunge and take advantage of these low rates. Many top analyst think the chance for a significant drop in interest rate in 2018 is slim to none. Barring a major economic shock, rates are expected to continue slowly increasing.

Rates Are Still At Historic Laws.

Here’s the good news! Even though interest rates have been rising recently, they are still incredibly low relative to the past 40 years. At the time of this article, the average 30 year fixed rate is 4.42%. Compare today’s rates to 1981, when the average rate was 18.53%. That over 300% higher!

Moreover, the absolute lowest average rate have been in the past 40 years was 3.40%. That’s only 1% lower than they are today. According to the TheMortgageReport.com,

“If you were to lock in an a mortgage today, it would be at a better interest rate than 85% of homeowners in history.”

Conclusion:

Experts agree that interest rates are expected to slowly tick up throughout the rest of the year. The FED will likely continue with it’s planned rate hikes in order to balance our strong economy, low unemployment rates, and increasing home prices are major reasons.

For this reason, many homebuyers are taking advantage of these historically low interest rates. By locking in to a rate today, the can enjoy rates lower than the vast majority of Americans who have ever lived. This rate will stay the same regardless of future increases, and the wise homeowner will save tons of money on finance charges while still enjoying equity appreciation.

Let us help you invest in your future and take advantage of some of the lowest rates in the past 40 years. Talk to a member of the Blake Team today to find out just how easy buying your dream home can be.