Mortgage rates across the United States are close to their historic lows, and Mississippi mortgage rates are no exception. Interest rates reached their lowest point in the second half of 2012. After rising through 2014, however, mortgage interest rates fell back towards their lows of 2012. In December 2015, the Federal Reserve increased interest rates for the first time in nearly a decade. This 0.25% increase in the Federal Funds rate translates into mortgage interest rates because as the Federal Reserve increases the rate they charge banks to borrow money, banks increase their own lending rates.
What Are the Mortgage Rates Around Mississippi?
At the beginning of 2016, mortgage rates in Mississippi peaked around 4.1% for the 30-year fixed rate mortgage. Interest rates followed a fairly steady decline into February, and rates around Mississippi have stayed near 3.8% for the past few weeks. The current average rate for a 30-year fixed rate mortgage in Mississippi is 3.85%. The average rate in Mississippi for a 15-year fixed rate mortgage is 2.85%. Both of these rates are nearly unchanged from February 2015, when rates were at their lowest levels since 2012.
Most commercial lending banks in Mississippi have a presence in all of the bigger cities throughout the state. Therefore, mortgage rates are quite similar in locations throughout the state. For borrowers putting down 20% with above a 740 credit score, mortgage rates on a 30-year fixed rate mortgage are between 3.75% and 3.85%. Direct online lenders offer lower interest rates to borrowers because they do not have the overhead expenses associated with bank branches present in towns across the state of Mississippi. As a result, the average 30-year fixed rate mortgage with 20% down and a 740 credit score is between 3.5% and 3.65%. These interest rates are the rates offered to the best borrowers with the best credit scores and down payments exceeding 20% of the purchase price. Most borrowers cannot expect to get those same rates. The rate a borrower is actually offered if approved for a loan is dependent upon the risk of the borrower, the amount of the mortgage, the amount of cash the borrower has for a down payment at closing,  and the overall risk or uncertainty about future economic and financial market conditions.
What impacts mortgage interest rates?
When a mortgage lender has a higher amount of uncertainty about the borrower and the future of the financial markets, mortgage interest rates are also higher to reflect this level of risk. These are some of the risks that lenders price into the mortgage interest rates that they offer to borrowers. Predicting the future of mortgage rates involves assessing these risks and changes to the market.
- Default risk – This is the risk that the borrower’s ability to make debt payments changes after a loan is made. That is why borrowers who are considered to be riskier or more likely to default on their loan pay higher mortgage interest rates. Credit score and credit history are important tools for lenders determining default risk.
- Interest rate risk – This is the uncertainty about the future interest rates and levels of inflation. Since interest rates remain near record lows, it is more likely that they will continue to go up rather than down. The uncertainty relates to when they will increase and by how much.
- Liquidity risk – This is the risk that a mortgage originator will not be able to sell the mortgage in the secondary market. Originators regularly sell their mortgages to institutions such as Fannie Mae and Freddie Mac. Selling their mortgages gives the originator funds to lend out to new borrowers.
- Legislative risk – Changes to tax laws and regulation of financial markets impact mortgage lenders in a variety of ways. Regulatory changes can impact lending standards as well as costs that then get passed down to the borrower in the form of higher interest rates. Tax law changes can also impact the ability of borrowers to qualify for mortgages and the overall demand for funds.
What will happen to mortgage interest rates for the rest of 2016?
Although the Federal Reserve had originally indicated that there was a high probability of further rate increases throughout 2016, recent reports suggest that interest rates will likely stay pretty close to their current level for most of 2016. Poor economic performance in China negatively impacts the amount of money invested in the global financial markets. So, economic growth around the world is likely to remain sluggish through the end of 2016. Â Legislative risk and uncertainty about future economic conditions are quite high this year due to the upcoming presidential election in November. The presidential candidates express vastly different ideas about public policy that could completely change the economic and regulatory conditions in the United States. Borrowers can expect little change in mortgage rates until after the presidential election.
2 Point Highlight
For borrowers putting down 20% with above a 740 credit score, mortgage rates on a 30-year fixed rate mortgage are between 3.75% and 3.85%.
Borrowers can expect little change in mortgage rates until after the Presidential election.
