Real Estate News

Mortgage rates continue to drop, but for how much longer?

Published: 07 Sep 2017

Over the past several months, mortgage rates have hovered below 4 percent despite an improving economy that many might have otherwise expected to lead to declining home affordability. That activity was certainly a trend that continued through the end of August, extending current homeowners and would-be buyers alike an opportunity to lock in a near-historically good deal on their home loans, but experts also caution the trend isn't likely to last much longer.

Average rates on 30-year fixed-rate home loans - typically favored by buyers - slipped to 3.82 percent in the week ending Aug. 31, down from 3.86 percent a week before, according to the latest Primary Mortgage Market Survey from Freddie Mac. That decline marked the lowest level observed in the 2017 calendar year, but was still notably higher than the 3.46 percent seen in the same week last year.

Similarly, rates for 15-year FRMs - most often used in refinances - slipped to 3.12 percent from 3.16 percent but was still up from 2.77 percent a year earlier. Sean Becketti, the chief economist at Freddie Mac, noted that these changes came as yields on 10-year Treasury bonds declined to the lowest level observed in 2017 on Aug. 29, and rates hit yearly lows for the second week in a row. However, Becketti further cautioned that as more positive economic data comes out in the remaining months of the year, would-be buyers and current homeowners can likely expect rates will start to rise.

Before rates rise, it might make sense for more consumers to seek a mortgage.Before rates rise, it might make sense for more consumers to seek a mortgage.

Why get into the market now?
For homeowners in particular, rising rates should be a point of concern because once today's affordability is gone, it could be gone for some time. For many of today's owners who haven't yet refinanced, the hurdle had less to do with wanting to do so - after all, rates that bottomed out in 2016 were only about half of those that were common prior to the economic downturn - and more to do with not being able to afford a refinance in the first place, according to St. Louis television station KSDK. But thanks to the economic improvement seen over the past few years, many homeowners may be on the cusp of being financially capable of going through that process, and for those that are, now is the time to act. 

Do consumers see the opportunity?
However, in the week ending Aug. 26 - the most recent period for which data was available - application filings for both purchases and refinances took a step back from the previous week, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association. 

Refinancing now, before rates rise later this year, could help current homeowners cut their monthly mortgage payments by hundreds of dollars. For buyers, too, rising rates could create an affordability issue, but their biggest obstacles in most metro housing markets is more likely to be a lack of available properties leading to higher asking prices. In either case, it's vital for would-be borrowers to carefully assess their personal financial situations to see what will work for them.