If you are looking to purchase a new home in Vermont, there is a lot to think about. As you begin to hone in on the type of home you want, you are going to start to also figure out the financing and the type of mortgage you will need. There are a few different options out there and you will certainly find the one that fits you. As you begin your search for a new home in the Green Mountain State, here is a synopsis of what Vermont mortgage rates are expected to look like throughout 2016.
Vermont Mortgage Options
If you are planning on purchasing a home or are a first-time buyer, there are few different ways you can finance your home. The three types of traditional loans are the 30 year Fixed Mortgage, the 15 year Fixed Mortgage, and the 5/1 Adjustable Rate Mortgage. With a fixed rate, the interest is fixed for the life of the loan, and with an adjustable rate, the interest is lower for the first five years and then increases over time. The 30 Year Fixed Rate is the most common type of mortgage, and the 5/1 Adjustable Rate is fairly uncommon, especially since the housing crash in 2009.
Finance options are usually the same across the country, but Vermont has a few unique options that are helpful to know as you begin the purchasing process. If you are looking to purchase an affordable home, the Vermont Housing Finance Agency (VHFA), can help eligible buyers with lower interest rates, finance closing costs, and lower homeowner insurance costs. Additionally, if you are located in Chittenden, Franklin and Grand Isle Counties you might be eligible for a property with The Champlain Housing Trust (CHT). The CHT has a Housing Loan Fund, a Land Trust Program, and other programs that make home buying within reach to a variety of residents in the area. In Vermont, there is a wide array of options for home buyers to find a mortgage that really works for them.
Getting The Lay of The Land
As the economy in Vermont and around the country begins to stabilize and bounce back from the housing bubble in 2007-2009, the mortgage rates are still considerably low. This is because there is a direct correlation between interest rates and economic stability. In times of high unemployment and economic instability, rates are usually set very low. These lower rates help stimulate growth and stability. Once the unemployment rate decreases significantly and the economy begins to grow and stabilize, you will see an increase in rates in order to mitigate inflation.
Many mortgage experts look to the Federal Reserve’s increase or decrease of Fed Fund Rates as a sign of the economy’s growth. The Fed Fund Rate dictates the rate that banks can lend funds to each other. It does not set mortgage rates, it affects Prime rates for credit cards and other bank lending. It is simply a very good indicator of where things are heading economically. Throughout most of the last decade, the Federal Reserve did not increase rates at all. This was a way to help stimulate the economy and to help pull the American people out of the recession. In mid-December of 2015, the Federal Reserve increased rates by .25%. That small change is leading predictions that things are stabilizing and rates will begin to change and increase into 2016. This will certainly be true if the economy and unemployment rates continue in a positive direction throughout 2016.
As of December 2015, the Vermont unemployment rate was 3.6%, the second lowest rate in the Northeast, and well below the 5.0% national average. Over the last year, there has been an increase of technology jobs, renewable energy jobs, and food-related jobs. These are positive indicators that Vermont is beginning to do well, and a slow mortgage rate increase is certainly possible. Yet the predicted overall increase is not expected to be significant.
Predictions for 2016
As 2016 finds its stride, the national bank rates for mortgages are hovering just below 4%. In Vermont, the current bank rates are 3.59% for 30 Year Fixed Rate mortgages, 2.82% for the 15 Year Fixed Rate mortgages, and 3.06% for the 5/1 Adjustable Rate mortgages.
The Federal Reserve meets throughout the year, and at each meeting decide whether to increase, decrease, or leave the rates the same. They will take into consideration factors beyond unemployment and economic stability. They might include global issues which could affect the economy or even gas prices. Mortgage experts predict that the Federal Reserve will employ small and incremental increases over the course of 2016, allowing them to gauge market reactions throughout the year. It is expected that the 30 Year Fixed Rate would only increase to 4.75% by the year’s end. Rates for the 15 Year Fixed Rate and the 5/1 Adjustable Rate mortgages will have similar percentage increases. These increases are not large and are not expected to be outside of affordability, yet it is an indicator that strides are being made to normalize rates and move past the long-term effects of the housing bubble and subsequent recession.
2 Point Highlight
These are positive indicators that Vermont is beginning to do well, and a slow mortgage rate increase is certainly possible.
Strides are being made to normalize rates and move past the long-term effects of the housing bubble and subsequent recession.
