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Mortgage Rates Forecast for 2017

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The forecast for 2017 is straightforward. People will mortgage on new homes, the market will be active, and the rates on 30-year fixed mortgages will be slightly higher than last year and hover between 4.2-4.3%.

A common misconception suggested by lazy mortgage rate forecasters is that the rates drive or halt the frequency of which the population closes on mortgages. To the laymen, this may seem intuitive enough of an idea. But upon closer examination, the predominant factor that directs the public into being more active or inactive in the sellers’ market is their necessity, with all the nuances and living challenges that bring that situation about. Interest rates do play a part in a prospect’s timing for sure, but they’re not final when it comes to the decision of mortgaging a house. Forecasters often forget that.

People buy and sell their homes in all market conditions for many case-by-case reasons regardless of what the rates might be at the time. Families separate, new families form, jobs become scarce, new bases open, and so on.

Necessity is the mother of invention. And in fact, if we were to conjure up an equation that measures a person’s likelihood to refinance or mortgage a new home, it would look something like this:

Necessity x (Interest Rate ÷ Time Between Each Change in Interest) = Frequency of New Mortgagors

The rates which previously had been floating on 3.50% before America’s Presidential election leaped to 4.25% to kick start the new year.

Just last week the Fed decided no changes to be made to the current rates but they warned against rising figures for the second quarter of 2017.

Still more, the secular 10-year bonds on the U.S. Treasury will likely find their equilibrium between 2.25% to 2.50% and are projected to shift between 3% to 4%. If this range is reached, 30-year mortgage rates will follow suit and level off between 4.75% and 5.75%.

But prospective homeowners shouldn’t feel discouraged that they will miss out on their chance to realize their dream home. If the newly elected office lives up to the hype and delivers on its promise to improve job growth, reduce taxes, and alleviate the public from some of the restrictions put on getting a mortgage, new homeowners can feel good about what it is to come.

All in all, it’s not about whether mortgage rates will rise – after all, there is the 5-year fixed rate option currently hovering 3.3 and 3.5% - but will the new administration follow through with their promise to strengthen the economy? If reduced taxes, increased job growth, and eased up mortgage closing become the norm, more Americans will have more house to afford and more money to pump into the economy.

For more details and forecasts for the rest of the year, click here.

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