Mortgage Rate Predictions for 2017 Have Been Revised Upward

The Mortgage Bankers Association (MBA), an industry group, recently increased its mortgage rate predictions and forecast for 2017. This was partly a response to the surge in mortgage rates that occurred during the last few weeks of 2016, and is shown in the chart below.

MBA analysts expect that the average rate for a 30-year fixed home loan will climb gradually throughout 2017, perhaps reaching 4.7% by year’s end. That’s up from a fourth-quarter projection of 4.4% in their previous forecast.

Note: At the time this story was published, on New Year’s Eve, 30-year mortgage rates were averaging 4.32% according to Freddie Mac.

Mortgage Chart Shows Rate Spike at End of 2016

Soon after the U.S. presidential election, mortgage rates in the U.S. began a steep upward climb that was still ongoing when this article was published. You can see this trend clearly in the chart below, which is based on the weekly market survey conducted by Freddie Mac.

PMMS Chart Dec. 29
Mortgage rate trends through December 29, 2016. Source: Freddie Mac PMMS.

This chart also shows why economists and analysts have revised their mortgage rate predictions for 2017. Many forecasts were built on the assumption that 30-year rates would start the new year somewhere between 3.5% and 3.75%, which is where they were a couple of months ago. But they’ve now surged well past that range and have crossed into 4% territory, requiring a new set of mortgage rate forecasts for 2017.

Here are the average rates as of December 31, 2016:

  • 30-year fixed mortgage: 4.32%
  • 15-year fixed: 3.55%
  • 5/1-year adjustable (ARM): 3.30%

So that’s where we are right now. Looking forward, here are some mortgage rate predictions for 2017.

MBA’s Mortgage Rate Forecast for 2017

As mentioned earlier, analysts with the MBA expect that home loan rates will rise gradually during 2017. They are not predicting a huge spike like the one we saw over the last few weeks (see chart above), but rather a gradual upward trend.

Here are the Mortgage Bankers Association’s quarterly predictions for average 30-year loan rates.

  • Q1 2017: 4.3%
  • Q2 2017: 4.4%
  • Q3 2017: 4.6%
  • Q4 2017: 4.7%

So during the first quarter of the new year, they expect 30-year mortgage rates to average 4.3%. That’s where we are right now, at the end of December 2016, which means they expect some rate stability over the coming weeks.

Going forward, the industry group forecasts a steady but gradual rise in mortgage rates throughout 2017.

Of course, these are just predictions. No one can predict future interest rate trends with complete accuracy. In fact, at the end of 2015, MBA’s analysts predicted that rates would rise steadily throughout 2016, and that did not happen (though we did see a spike during the last nine weeks of the year).

The point is, you have to take these mortgage rate forecasts with a grain of salt. They are an educated guess based on current conditions, and nothing more.

A Different Outlook from Freddie Mac?

The economists at Freddie Mac — the government-controlled corporation that buys and sells mortgage loans — seem to have a slightly different view for 2017.

In December 2016, their economic and housing research team issued some predictions for mortgage rates. Based on their quarterly forecast, they expect the average rate for a 30-year loan to hover around 4.2% throughout 2017. Though they did say that “Interest rates will gradually rise as the Federal Reserve continues on its path of policy normalization.”

Again, predictions are a tricky business, especially with the kind of volatility we’ve seen lately. The one thing we can say with certainty is that borrowers will encounter higher mortgage rates at the start of 2017 than at the beginning of 2016. The chart above is evidence of this.

Disclaimer: This story contains mortgage rate predictions and forecasts for 2017. Such statements were provided by third parties not associated with our company. As a general rule, the Home Buying Institute (HBI) makes no claims or assertions about future trends within the housing industry.

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