May Mortgage Rates

I was showing a property to a prospective buyer this week when the buyer’s agent and I started to discuss mortgage rates. I told him that I thought that mortgage rates are going to rise towards the end of the year, but he was quite sure that mortgage rates are going to stay the same. So I decided to dig a little deeper this month and see what the experts have to say about mortgage rates.

It goes without saying that these are all predictions, and as such, can never be guaranteed as there are a variety of wildcard factors that can influence rates. Having said that, here is what I found.

Both Freddie Mac and Fannie Mae predict that mortgage rates will rise in 2015.

The Mortgage Reports, hold a regular “guessing game” contest:

• In it, real estate agents, mortgage loan officers, journalists, consumers, and Wall Street pros compete for the title of “Best Mortgage Rate Forecaster” in the land.The Q1 Winner, Chicago-based Joe Caltabiano with Guaranteed Rate, expects mortgage rates to drop. The second-place player, Sean Young, expects mortgage rates to rise.

Bankrate.com analysts suggest that rates will rise, but to remain under 5%: “We’ll see rates near 4 percent on the low side if there’s an economic stumble or geopolitical crisis, and rates as high as 4.8 or 4.9 percent if the Fed missteps or misspeaks.”

So, in summary: who knows. No surprise there. It does appear that more sources think rates will rise this year. However, most everyone is in agreement that if/when mortgage rates do rise, the increase will be moderate. In addition, looking from a historical perspective, even rates as “high” as 5% are pretty outstanding.

Mortgage Rates as of 5/20/15

Source: totalmortgage.com

Freddie Mac’s Deputy Chief Economist, Len Kiefer, expresses concern that family income needs to rise with rising home prices and interest rates:

How all of this plays out remains to be seen, but it appears to me that we are near a high point for sales (volume) for the year. Increased mortgage rates and higher prices will make home affordability more difficult in the months ahead for the average home buyer. I don’t think it will be catastrophic, I just think that we will see things slow down a bit as the year marches on (especially after July, the “typical” end of the home buying season).

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