What will mortgage rates do through the spring and summer of 2015, and into the fall? That’s what many home buyers and homeowners want to know. After all, rates have been hovering near historic lows for months now. But how long will the party last?
To get some insight into the matter, we turned to one of the most well-informed mortgage rate forecasts available anywhere, the “U.S. Economic and Housing Market Outlook” provided by Freddie Mac.
Mortgage Rate Forecast: Is September 2015 a Key Date?
Each month, Freddie Mac publishes a housing and mortgage market forecast. The company’s economists look at current conditions and offer some well-educated guesses as to where the market is headed. They make predictions for 30-year mortgage rates, among other things.
According to their latest forecast, issued earlier this month, the folks at Freddie Mac feel that mortgage rates will inch upward between now and the end of 2015. They mentioned September 2015, in particular, as a possible milestone for rate movement.
Why September? Because that’s when the Federal Reserve is expected to raise the federal funds rate, which they’ve kept near 0% for the last few years. If the Fed does indeed take this action, it could lead to a rise in long-term interest rates, including those applied to 30-year mortgage loans.
According to the Office of the Chief Economist at Freddie Mac:
“Mortgage rates will likely stay low over the next few months as market participants await the Federal Reserve’s decisions on whether and when to raise its short-term policy rate … our forecast calls for mortgage rates to drift slightly higher over the next six months, increasing more around September when we anticipate the Fed will begin raising rates.”
Of course, no one can predict the future with complete accuracy. This is especially true when dealing with the Federal Reserve, a famously tight-lipped group. The bottom line on this is that there’s a good chance mortgage rates will climb between now and the end of 2015, especially if the Fed lifts the funds rate in the fall. If this occurs, home buyers and refinancing homeowners could face higher mortgage costs.
Where We Are, And Where We Are (Possibly) Going
Yesterday, Freddie Mac reported the average rate for a 30-year home loan fell to 3.65%, down slightly from the week before. Thirty-year loan rates have been hovering in this range for weeks, and they’ve been below 4% all year. But the company’s mortgage rate forecast issued in May 2015 hints at higher borrowing costs down the road.
If the outlook chart shown above is any indication, the average rate for a 30-year mortgage loan could climb above 4% by fall 2015. That’s still relatively low, compared to historical averages, but it’s an increase nonetheless. And that’s enough to put it on the radar of future home buyers and mortgage borrowers.
In many parts of the country, rising home prices are a bigger concern for home buyers than rising mortgage rates. Home prices rose significantly over the last two years, especially in California, the Southwest, and in major metro areas across the country. While home-price appreciation has slowed, economists are still predicting additional gains through the end of 2015 and into 2016. This is something buyers should keep an eye on.
Disclaimers: This story contains mortgage-rate forecasts and predictions through fall 2015. Forward-looking statements such as these should not be viewed as facts. They are the equivalent of an educated guess. This story contains third-party data that is deemed reliable but not guaranteed.