Mortgage rates dip below 4% again – where next?

National mortgage rates for the 30 year FRM (Fixed Rate Mortgage) dipped below 4% again this week after seven weeks above 4%.

Source: Freddie Mac

And the 30 year FRM is still lower than it was a year ago:

Source: Freddie Mac

Forecasting that mortgage rates will rise has been a favourite occupation of soothsayers ( or economists as they like to call themselves) for a couple of years now. My last article on the subject in June was Mortgage rates “forecast to reach 4.5% by year end”, quoting the Mortgage Bankers Association.

When will the Federal Reserve raise rates?

Predicting the timing of the Fed’s long-delayed first move is becoming an obsession on a scale not seen since all the nation’s TV channels broadcast the “chase” of OJ Simpson’s white Bronco.
The answer is some time this year – probably, almost certainly, maybe.
I – and a lot of others – wish the Fed would just announce a small increase and let us get on with our lives.

What will be the impact on mortgage rates?
The answer is probably very little. The Fed’s move will affect short-term interest rates. As the Wall Street Journal stated this week:”Rates for fixed-rate, 30-year-mortgage loans key off the 10-year Treasury yield. So, with most observers predicting 10-year yields will remain fairly stable as the Fed begins to tighten, people with relatively good credit standing should continue to see loan rates near 4% or only a little higher.”

What about Adjustable Rates Mortgages (ARMs)?
ARMs are priced off shorter-term indicators and may see some increase in pricing. This does not mean that ARMs should not be considered, bearing in mind that a 5 or 7 year ARM (where the rate is fixed for the first 5 or 7 years) is available at a discount of around 1% to the 30 year FRM. Like marriage, however, ARMs should not be “entered into unadvisedly or lightly; but reverently, discreetly, advisedly, soberly, and in the fear of God.”

Well maybe not all of those conditions are necessary, but ARMs do need to be understood and considered in the light of one’s overall financial planning.

Conclusion
Same as in my previous reports: current mortgage rates are very attractive. Now the challenge is to find a home in a market still suffering from an inventory shortage.

 If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or [email protected].

Read Which broker should sell my home?

Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated

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