Back now with our special ‘The Year Ahead,’ in which we talk to the pros about what to expect for your real estate plans in 2018.
And we’re going to end this hour of the show by talking about what might happen with mortgage interest rates in the coming year. Now, of course, I don’t claim to know….in fact, nobody can say with authority exactly what’s going to happen with mortgage interest rates next year. But we can look at some scenarios – and what those scenarios might mean to you, if you plan to buy real estate or refinance in 2018.
Right now,interest rates for a 30 year fixed rate mortgage, are hovering at right around 4%.
A fifteen year fixed rate loan is lower, of course, down around 3.3%….and that’s also where you’ll find many adjustable rates as well.
Now that is just a little bit higher than they were a year ago. In 2016 fixed rate mortgages averaged around 3.7%. So they have ticked up a bit in 2017….and we’ve seen the rates fluctuate a little – some weeks up a bit, some weeks down. But by and large they’ve stayed in the same ballpark.
But what about 2018?
Well, Freddie Mac predicts that next year, 30-year, fixed rate mortgages could hit 4.4%. Around a half point higher than they are right now.
That is still extremely low, but we are seeing a very slight notching up, over time. Not a spike, not a surge, just a small, and slow increase.
Probably not enough to suddenly slam the door on someone who wants to buy a house next year. But even so, those rising rates do mean that a buyer’s money won’t go as far as it does – right now.
Say that you’re buying a $300,000 house, and you’re putting down 10%. OK? And say you get a mortgage at 4%. According to the mortgage calculator at Bankrate.com, your monthly payment will be around $1290 per month.
But at 4.4%? That payment increases by around $60 – to around $1350. That’s not going to break the bank, but that IS an extra $720 bucks a year you’ll have to pay – just because the mortgage interest rate ticked up.
To keep that payment down around $1290, you have a choice – either put down more money, or buy a less expensive house.
If you wanted to put down more money – to keep you payment at around $1290? You’d have to put down an extra $12,000.
And if you decided to buy a less expensive house? Well, to keep that mortgage payment at $1290, you’d have to forget the $300,000 house – and settle for one that costs roughly 285,000. Fifteen grand less.
So again, a swing in mortgage interest can have a big impact on your plans.
Now as we said, Freddie Mac expects mortgage interest rates to rise from today’;s level of around 4%, up to 4.4 in the coming year.
Other forecasts include Kiplinger’s, which also predicts 4.4% fixed rate mortgages in the coming year.
NAR’s chief economist Lawrence Yun puts the number a little bit higher at 4.5%.
And the Mortgage Bankers Association predicts rates even a bit higher – 4.8% next year, followed by 5.1% by the end of the following year.
So again – if all the economists are correct, we will see a slow, and small rise, over the next year. Nothing earth shattering, but as we discussed a few minutes ago, even a small increase in mortgage interest rates can cost you money.
So what do you do, if you are planning to buy a house?
Well, the experts will tell you, take the time to get your financial house in order. Save as much money as you can. Pay down debt. And get that credit score as high as you can.
Because no matter what happens to mortgage interest rates in the next year – you will get a shot at the best possible rates – if YOU are the best possible candidate or that home loan.