Record low mortgage rates are spurring further activity in the burgeoning US real estate market, and most people are holding their breath to make sure that the good luck continues. With all eyes on the Federal Reserve and mortgage rates up in March, every junior analyst with an office and a calculator is trying to find the magic bullet to boost their profile: the date when the Federal Reserve will actually raise the base lending rates in the country. However, the housing market still continues to improve across the board, or does it? Here we take a look at why mortgage rates are up in March and what this means for your efforts in property transfer.
What are the current mortgage rates?
According to the latest report from Freddie Mac’s Private Mortgage Market Survey (PMMS), the current mortgage interest rate is 3.71 percent, a rise of 0.01 percent year over year and a 0.1 percent rise over the month of February. The current 15 year fixed mortgage rates are especially attractive at 2.98 percent, and five year adjustable rate mortgages (ARMs) are at 2.9 percent.
The Federal Reserve, one of the most important agencies affecting US mortgage rates, is keeping a cautious tone about changing any of the rates that it has control over, a move that would instantly affect the mortgage rates in real estate moving forward. Although house sales are up across the nation in March, the Federal Reserve has not seen enough stability to commit to bringing base interest levels back up to normal levels, and with good reason.
What affected the mortgage rates in March?
Much of the positive movement in the housing market was relegated specifically to the West in the United States. This part of the country experienced a seven percent rise in housing sales from the previous month. The rest of the country actually lost sales to the tune of two percent. However, there were so many housing starts on the West that the overall movement in the United States stood at a positive three percent from February. The Federal Reserve wisely chose not to move base rates on this positive data because of the uneven way in which it applied to the country as a whole.
Nothing in the March jobs report or in real estate news did anything to affect the mortgage rates in a meaningful way. The only real diversion from a virtual flatline was in the 30 year fixed mortgage rate during the last week of March. The 15 year fixed and the five and seven year ARM rates did not follow suit with the 30 year, causing many analysts to think that the 30 year was a fluke that did not truly create any cause for concern.
What will mortgage rates do in the near future?
There are many teams of analysts who cannot say for sure what the mortgage interest rates will do for the next few months in 2016. The best analysts from Fannie Mae believe that the interest rate will go up around a percentage point by the fourth quarter of the year. Similar results come from an insider team from the Mortgage Bankers Association. Both of these institutions have been wrong before, and neither of them exercise any direct power over the market. The institution that has that power is the Federal Reserve, and it is making sure not to say anything except that it does not know anything more than any other analyst. This may seem counterintuitive, but only the Federal Reserve knows for sure.
The smart money has the interest rate rising at some point in 2016, because it did just that in March on news of continued stability. One might assume that as the economy gives no negative news, the market will take that as a positive and factor in real gains for the housing market, raising the rates.
What does this information mean for me?
Although no one can tell exactly when or for what reason the market interest rates will rise, the fact remains that interest rates are currently still hovering around all time lows. There is not much lower for them to go, so it may be the time to lock in a great fixed rate before the inevitable rise comes. Interest rates cannot stay this low and sustain a viable market; therefore, we know that rates will rise at some point in the future. No one knows when, not even the Federal Reserve, and it is the institution that sets the rates.
If you are thinking about getting into the market, now is the time. No matter where you are thinking of moving or your current financial situation, you can get an historically low interest rate on a home. If you are a first time home buyer or eligible for any of the many government sponsored loan programs from agencies like the Federal Housing Administration (FHA), the United States Department of Veterans Affairs (VA), or the United States Department of Agriculture (USDA), you can also enjoy the added stability of the government subsidizing your housing start.
