At the end of 2015, we reported that many economists and housing analysts were predicting a gradual rise in mortgage rates during 2016. This was partly because of the Federal Reserve’s decision to raise the short-term federal funds rate, after holding it near zero for years (along with other factors).
But so far in 2016, mortgage rates have been dropping steadily. For instance, the average rate for a 30-year fixed mortgage has either dropped or remained unchanged every week since the beginning of the year. You can see this trend clearly in the mortgage rate chart below, obtained courtesy of Freddie Mac.
This downward trend contradicts the “conventional wisdom” we reported a few months ago, and it’s good news for anyone who is in the market to buy or refinance a home.
Here’s an updated look at mortgage rates in 2016, including the drops we’ve seen in recent weeks:
Chart: Watch Mortgage Rates Drop in 2016
The chart below accompanied Freddie Mac’s latest weekly survey of the primary mortgage market, published earlier today. On the right (and more recent) side of the chart, you’ll see the downward trend mentioned above. If you were to draw a vertical line upward from the December 31 marker, you’d end up with a nice down slope to the right of that line.
The average rates assigned to other mortgage products — including the 15-year fixed mortgage and the 5/1 ARM — have followed this downward trend as well. We have now hit a one-year low point in the 30-year fixed category.
It’s Official: 30-Year Rates Fall to a 12-Month Low
The average rate assigned to a 30-year fixed mortgage (FRM) has dropped by 39 basis points, or 0.39%, since the start of 2016. When 2015 came to a close, the average rate for a 30-year loan was 4.01%. As of the latest rate survey taken this week, that average had fallen to 3.62%. That’s the lowest it has been since early February of last year.
It bears repeating: today’s 30-year mortgage rate average has dropped to a 12-month low.
This should come as welcome news to home buyers in the market to purchase a house, and homeowners looking to refinance. Declining rates will improve housing affordability for buyers, and lessen the blow of rising home prices. Dropping mortgage rates will also put more homeowners in a position to refinance their existing loans and save money over the long term.
Other Loan Products Are More Affordable as Well
The 15-year mortgage rates average has also dropped steadily since the start of 2016. During the first week of this year, the 15-year average was 3.26%, according to Freddie Mac’s weekly survey. This week it fell to 2.93% — its lowest level since April of last year.
The average rate for a 5-year adjustable-rate mortgage (ARM) also dropped this week, landing at 2.79%.
Perhaps those upward predictions will eventually pan out. Perhaps we will end 2016 with rates being higher than they were at the end of last year. But right now, it’s just not happening. So much for forecasts.
Disclaimer: This story mentions forecasts and predictions offered by third parties not associated with the Home Buying Institute. The publishers of this website make no claims or guarantees about future interest rates or trends within the mortgage market.