2017 Mortgage Rates
Most economists predict an upward climb for mortgage rates in 2017 as the economy demonstrates additional growth and potential inflation.
After a refi frenzy in 2016, refinancing levels are expected to decline in 2017. A survey conducted by RateWatch of 400 financial institutions polled found that 56.57% predicted mortgage rates are NOT likely to fall in 2017, thus throwing a wet blanket on refinances.
But rates are not the sole determining factor in a refinance transaction. Divorce, cash-out needs for home improvements, college education, and debt consolidation all allow borrowers to leverage the equity in their homes for other reasons besides a lower rate or term.
When the US Prime Interest Rate is 3.75% (and predicted to go higher), and a fixed rate, 15-year conventional mortgage rate hovers around the 3% mark, homeowners will still choose a first mortgage refinance option over a home equity line of credit.
Couple this with the new Fannie Mae guidelines of appraisal waivers and limited reps and warranties by lenders, stable to increasing home values, potential cuts in FHA Mortgage Insurance Premiums (MIP), and borrowers will take advantage of a refinance option.
My prediction is that the economy may stumble a bit in 2017 as President Trump institutes game changing executive orders and legislation.
Most of the stumbling will be due to consumer and employer uncertainty. Consumers may hit the pause button on big purchases, and employers may suspend hiring until the smoke clears.
So, the uncertainty will present a stagnant pause.
Oddly enough, the same uncertainty will lead to a soft Treasury bond auction market, which will have more supply than demand. Consequently, the 10-year Treasury yield, which drives the mortgage rate market, will increase.
It may get worse before the policies have a chance to turn the country around. In the meantime, while rates are below 4% for a 30-year fixed mortgage, I’m bullish.