Just a short while ago, it was generally presumed in most financial circles that super-low mortgage rates were a dying breed. There’d been a period of plenty for homebuyers and refinance loan applicants alike, but the general consensus was one of ‘you snooze, you lose’ for want of a better description. After all, it’s hard even for expert analysts to predict interest rate gyrations.
Though this was not the first time pundits warned of this possibility, the fact that the Federal Reserve eventually raised short-term interest rates for the first time in almost a decade cast a pall upon the prospects of potential homebuyers and fence-sitters hoping for low rates. Fears of similar spikes to what happened in 2013 when the Fed began talks of paring its economic stimulus were quite common. However, the opposite has happened, as long-term mortgage interest rates are almost 40 basis points lower from where they were at the start of the year.
As of February 25, 2016, Freddie Mac’s average rate on 30-year fixed-rate mortgages is 3.62 percent, down from 4.01 percent on January 1. That’s a rate that hasn’t been seen in close to a year, and one close enough to all-time record lows. With that in mind, many analysts and economists have revised their forecasts to indicate a more optimistic tenor for mortgage rates.
While HSH.com’s Weekly Mortgage Rates Radar showed a slight increase in 30-year FRMs this week, with rates ticking up five basis points to 3.74 percent, and a bigger (11-basis point) increase for 5/1 hybrid adjustable rate mortgages, HSH vice president Keith Gumbinger believes that a spike in rates is not too likely, and consumers need not panic despite this first weekly increase for calendar 2016.
“While there’s little likelihood of a spike in rates, it’s reasonable to think that there’s potentially more upside than downside for them, especially if the economy continues to chug along,” said Gumbinger in a blog post. “That said, even if they should edge higher, mortgage rates are in a good position to support a positive spring home buying season, provided there are desirable homes to buy at affordable prices.”
Indeed, it looks like the time is right for fence-sitters to start making a move and buying a new home at the current rates. According to Bankrate.com chief financial analyst Gregory McBride, this reduction in interest rates could “create some much-needed breathing room” in families’ household budgets. But considering that nobody can really tell for sure how long rates would stay low, another number-cruncher, Realtor.com chief economist Jonathan Smoke, believes consumers should seize the day as “it’s completely uncertain how long this opportunity (to take advantage of low rates) is going to be there.”
