What Will Happen to Mortgage Rates as Democrats Take Control of the House?

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There have been several analyses performed in recent months that indicate the average rate for a 30-year fixed rate home loan could be in the 4.6% to 4.7% range next year.

dems winWhat will happen to those mortgage rates when Democrats take the House after winning the election last night?

Some experts believe there will be little change in home loan rates, but others think that Democrats may scare the markets and could actually cause a slight decline in mortgage interest rates as economic activity is reduced.

New Rate Forecasts for 2019

Over the last 30 days, three major housing organizations have brought out mortgage rate forecasts that are looking to next year. These groups include Freddie Mac and Fannie Mae, the two government backed enterprises that buy home loans from lenders. Another survey was done by the National Association of Home Builders.

The rate forecasts for next year are varied somewhat, but it seems that all groups expect to see stability as far as rate movements. Fannie Mae analysts and the NAHB do not expect to see the average 30-year fixed rate to change a lot in coming months. Freddie Mac thinks they will rise slowly over the next year.

Here are the three mortgage rate forecasts for 2019:

  • Fannie Mae published its forecast in July 2018. They are predicting the average rate for a 30-year fixed rate mortgage will start in 2019 at 4.6% and will stay in that range for the year.
  • The National Association of Home Builders also sent out an updated forecast for July 2018. They have predicted the 30-year mortgage loan rates would be 4.7% next year. This is roughly in line with the long-range outlook for Fannie Mae.
  • Freddie Mac’s latest forecast was also published in July, is calling for rising rates over the next 12 months. Their outlook for the quarter predicted that 30-year rates would be 5% during Q1 2019 and would rise a bit throughout the year.

General Expectation

Most housing and mortgage experts do not think there will be major jumps in rates. Of course, these are educated guesses based upon current market trends in the housing market, Wall Street and the overall economy. It is possible they could become more inaccurate over time.

There have been predictions in the past that were not accurate. At the end of 2016, some of these groups predicted rates would rise all through 2017. But they actually fell during the first have of 2017 and then stayed in a narrow range.

The general consensus going forward is rates will stay fairly stable in late 2018 and into 2019, unless the Democrats take control and scare the markets. But they are likely to only take the House; without the Senate and Trump’s veto pen, most Democrat initiatives will be stillborn.

Home Prices Are Still Rising in Most US Cities

Based upon the above mortgage predictions, home buyers may not feel they should worry about a major jump in rat

es soon. But the rise of home values is a worry. These home values will probably rise in 2019. This could reduce affordability for many people. If Democrats take the House, perhaps there will be a reduction of growth in home prices as economic indicators may decline.

The current median home value in the US is $217,000. Median home values have increase 8% in the last year. Zillow predicts there will be a 6.6% rise in the next year.

It is uncertain what effect there will be on mortgage interest rates and prices as the Democrats take back control of the House. We will see what happens to the markets next week as the markets react to the Democrats winning.

References:  http://www.homebuyinginstitute.com/news/rate-forecasts-predict-slight-increase/

About Tom Murphy

Tom Murphy grew up in La Jolla, California surfing and carving his niche in the local real estate market. Mr Murphy has a stellar record as a loan officer with over a decade of experience helping people secure the right home loan. He now works at Movement Mortgage in Carlsbad CA.