The Veterans Day holiday on Monday contributed to a quiet week for economic news. On Wednesday the reading for the federal budget deficit for October fell from September's reading of -$120 billion to -$92 billion.
The Mortgage Bankers Association (MBA) recently revised its long-range mortgage rate forecast for 2017, due to a rate surge that began after the U.S. presidential election. The industry group expects the average rate for a 30-year fixed home loan to reach 4.7% by the fourth quarter of 2017, up from 4.4% in their previous forecast.
Chart Shows End-of-Year Surge
Mortgage interest rates started to rise during the first week of November. They’re still rising today, as of December 30th, though at a slower pace than in previous weeks. You can see all of this clearly enough in the chart below, which is based on the weekly mortgage market survey conducted by Freddie Mac.
MBA’s Mortgage Rate Forecast for 2017
This end-of-year surge is partly what led the MBA to revise its mortgage rate forecast for 2017. In their latest forecast, which was published on December 14, 2016, MBA’s analysts increased their quarterly predictions for average 30-year loan rates.
Here is their latest quarter-by-quarter outlook:
- Q1 2017: 4.3%
- Q2 2017: 4.4%
- Q3 2017: 4.6%
- Q4 2017: 4.7%
The economists at Freddie Mac have a slightly different view. In December of 2016, the company’s economists predicted that the average rate for a 30-year fixed home loan would hover around 4.2% throughout 2017. This suggests more stability than MBA’s 12-month outlook, though they added that “interest rates will gradually rise as the Federal Reserve continues on its path of policy normalization.”
The one thing we can say with certainty is that we will start 2017 with higher rates, on average, than we saw at the beginning of 2016. The chart above is evidence of this.
A Sense of Urgency Among Home Buyers
As we head into the new year, the average rate for a 30-year fixed home loan is at its highest point since 2014. This has caught the attention of home buyers and mortgage shoppers across the nation.
According to Freddie Mac’s latest market survey:
“On a short week following the Christmas holiday, the 10-year Treasury yield was relatively unchanged. The 30-year mortgage rate rose 2 basis points to 4.32 percent, closing the year with nine consecutive weeks of increases. As mortgage rates continue to increase, home sales and affordability will continue to be a concern for housing in 2017.”
Meanwhile, home prices are still rising in many cities across the country, and they are expected to continue moving north throughout 2017. The real estate forecasters at Zillow predict that U.S. home prices will rise by around 3.2% through the end of 2017, which is on par with historical averages.
The prospect of rising house values, combined with the mortgage rate forecast above, creates a sense of urgency among home buyers. Those who postpone their purchases until later in 2017 could end up paying more for a house and for a mortgage loan. So a strong case could be made for buying sooner rather than later.
Disclaimer: This story contains mortgage rate forecasts and predictions for 2017. These projections were provided by third parties not associated with our company. We have presented them here as an educational service to our readers. Individual rates vary based on a wide variety of factors, including the type of loan and the borrower’s qualifications.