Market Updates: What to Expect in Mortgage Rate Changes
While Freddie Mac reports stable mortgage rates, that could change relatively soon. The Federal Open Market Committee decided not to issue a rate cut after a recent meeting on June 19, however, after much speculation and continued concerns over key economic factors, indicated that it may soon begin to lower interest rates.
While current global events and yet-to-be-released economic data will ultimately determine the Fed’s future action, the current lending market puts those homebuyers with attractive credit histories in an advantageous position.
Mortgage Rates Remain at Historical Lows
Average 30-year mortgage rates hit their lowest level in more than two years at 3.82%. Current forecasts predict with near-certainty a rate drop after the next Fed meeting on July 31, with some commentators going so far as to predict that the lowest rates since pre-2012 lie ahead. Without concrete action from the Fed though, it’s hard to know what to expect.
Declining interest rates are, of course, ideal for potential homebuyers. This is because most adjustable-rate mortgages and home equity lines of credit (HELOCs) are tied to the prime rate. While the Fed sets bank rates, rather than mortgage rates, a cut by the central bank would impact consumer lending rates. With current rates hovering near the low 4s, the coming months might be the perfect time to purchase a home.
Current homebuyer demand is bolstered by low rates, a strong job market, solid wage growth, and consumer confidence. These key economic indicators suggest that homebuyers have the willingness and capacity to purchase homes in the current market and that demand will only increase as falling rates create even more enticing market conditions for buyers.
In addition, inventory is limited and prices are increasing throughout most of the country. This helps reduce the number of foreclosures, keeping lenders’ costs down and the demand for borrowers high.
Not Just for Buyers
However, falling interest rates aren’t only good news for homebuyers who want to save on mortgage costs and lock in favorable rates during peak homebuying season. Those looking to lower their monthly mortgage payments should also keep an eye on upcoming Fed actions, as current borrowers can refinance into a lower rate to save money.
If interest rates have dropped significantly since you purchased your home, or you have an adjustable-rate mortgage with a high-than-current interest rate, it may be time to explore refinancing. A large reduction in the interest rate, with the expectation that you will be remaining in the home for a while, could offer substantial savings.
Find out more about the mortgage options available to you by visiting OpenMortgage.com or calling us today.