With mortgage rates hovering right at 4% for the sixth consecutive week, homebuyers might start to feel they are invincible from rate increases. However, don’t get too comfortable just yet. Because according to the National Association of Realtors Chief Economist Lawrence Yun, mortgage rates will rise to 5% in 2015…and 6% in 2016.
While that seems high for those of us currently locking in 4.02%, it’s really not. Historically, mortgage rates have averaged around 8%. And just in the last decade, the median rate was about 6%.
The big question is: what will a rate increase do to home sales? Typically, higher interest rates discourage buyers. However, in the face of today’s tighter lending standards, a higher interest rate could allow many lenders to dial down their lending criteria slightly. And this could help extend mortgage credit and permit more buyers into the market.
So what might cause mortgage rates to soar into the New Year? Providing that global economic issues remain steady, if unemployment numbers continue to fall and the economy stays on its current path of growth, we could see 30-year fixed hit 5.1% by mid to late next year.
But no one has a crystal ball. A spike in market volatility or strong Q4 economic improvement could send interest rates skyward. That being said, if you’ve been considering refinancing or purchasing a home, contact your loan officer today to lock in rates before we see any major increases.