Seattle Mortgage Rate Trends and Forecast, 2016 – 2017

On August 4, Freddie Mac reported that the average rate for a 30-year fixed mortgage declined by 7 basis points to land at 3.43%. That’s good news for Seattle-area home buyers and mortgage shoppers. But how long will rates stay this low? What’s the forecast for Seattle mortgage rates through the end of 2016, and into 2017?

We’ll get to the long-range forecasts in a moment. First, let’s take a look at where we are right now.

Seattle Mortgage Rate Trends: Where We Are Now

As mentioned above, Seattle mortgage rates are currently hovering in the 3.4% – 3.5% range. These are average rates for 30-year loans, based on the weekly survey conducted by Freddie Mac. They solicit input from lenders across the country, including the Seattle metro area. They then compile the average rates presented by those lenders, and publish the results. They’ve been doing this since the 1970s.

Freddie Mac rate chart

Chart: 12-month mortgage rate trends. Source: Freddie Mac.

The chart above was published on August 4, 2016, along with the most recent survey results. It shows mortgage rate trends for the last 12 months, in three popular loan categories (5/1 ARM loan, 15-year fixed, and 30-year fixed). These rates are based on borrowers paying an average of 0.5 points at closing.

One thing will jump out at you right away. Current mortgage rates, shown on the far right side of the chart, are lower than they were at the start of 2016. Much lower, in fact. This flies in the face of earlier predictions made at the end of last year, when many economists were forecasting a steady rise in rates throughout 2016.

So that’s where we are in the first week of August. Now let’s adjust the lens and look out over the horizon, with a forecast for Seattle mortgage rates.

Forecast for the Remainder of 2016, and 2017

In July of 2016, the Mortgage Bankers Association issued their latest forecast for mortgage rates, extending through the end of 2017. Here are their quarterly predictions for average 30-year loan rates, between now and the end of next year.

  • Q2, 2016: 3.6%
  • Q3, 2016: 3.6%
  • Q4, 2016: 3.8%
  • Q1, 2017: 4.0%
  • Q2, 2017: 4.1%
  • Q3, 2017: 4.3%
  • Q4, 2017: 4.4%

According to its July forecast, MBA expects the average rate for a 30-year fixed home loan to rise slightly by the end of this year and gradually climb higher in 2017. Of course, they made a similar prediction at the end of 2015. So did Freddie Mac. Back then, both organizations expected rates to rise gradually throughout 2016. But as we can see from the chart above, it hasn’t played out that way.

Also in July, Freddie Mac offered a mortgage rate forecast that was similar to the MBA’s outlook shown above. The company stated: “we have also lowered our 30-year fixed-rate mortgage forecast for both 2016 (by 30 basis points) and 2017 (by 50 basis points) to 3.6 percent and 4.0 percent, respectively.” That means they expect rates to be higher in 2017, on average, than in 2016 — but only slightly higher.

Related: Seattle housing market forecast

The Federal Reserve and ‘Brexit’

The Federal Reserve has something to do with all of this. While the Fed does not control mortgage rates directly, they do control the shorter-term federal funds rate (which banks use when transferring balances). So the Fed’s monetary policies can have an indirect influence on mortgage rates.

The Fed has held the federal funds rate near 0% for the last few years, as part of a broader economic stimulus plan. Indirectly, this has helped keep mortgage rates near historic lows.

At the end of July, during one of their scheduled meetings, Fed officials “decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent.” In other words, there was no rate hike this time around. But there might be one in September, when Fed officials will meet again to discuss policy.

Kathy Jones, the chief fixed income strategist at Charles Schwab, recently told CNBC: “They [Federal Reserve officials] clearly have set the stage for a potential rate hike in September, but they didn’t want to commit themselves.”

Britain’s exit from the European Union (commonly known as “Brexit”) shook financial markets when it was announced back in June. Some analysts predicted this could affect the U.S. by, among other things, putting downward pressure on mortgage rates.

But Matthew Pointon, a property economist with Capital Economics, doesn’t expect Brexit to have much influence on the lending market going forward.

“Given we expect Brexit will have a minimal impact on the US economy, we see no reason to change our forecast for mortgage rates to reach 3.85% by the end of this year,” Pointon said. He added that rates are “set to rise gradually over the next couple of years.”

General Consensus: A Gradual Rise Ahead?

So what’s the general consensus here? Based on these and other sources, the forecast for Seattle mortgage rates could best be described as a “gradual increase” between now and 2017. But again, this is just a forecast. It’s the equivalent of an educated guess. A highly educated guess — but a guess nonetheless.

The point is that we probably shouldn’t expect mortgage rates to sink much lower than they are now, and that they could rise through the end of the year. This is something to consider, if you’re planning to buy a home or refinance your existing loan.

Rate Quotes for Seattle-Area Mortgage Shoppers

Are you a Seattle home buyer preparing to make a purchase, or a homeowner planning to refinance? We can provide you with an instant rate quote to help you move forward. We can also answer any questions you have about the different types of home loans, and which one might be best suited to your situation. We offer a variety of loan options, including FHA, VA and conventional.

Sammamish Mortgage has been proudly serving borrowers in the Seattle metro area for more than 20 years, and we welcome the chance to help you as well!

Click here to get a rate quote, or contact us with any questions you have.

Disclaimer: This article includes mortgage rate forecasts and predictions from third-party sources not associated with our company. We have simply compiled this information as an educational service for our readers. Mortgage rates tend to vary based on geography, loan features, and credit qualifications. Please contact us if you would like to receive a quote.