For the past two or three years, economists and industry insiders have forecasted that mortgage rates would soon increase to 6% or higher. But despite expert predictions, mortgage rates have actually decreased in 2016 and remain near historic lows.
Here is what influences our nation’s mortgage rates:
1. Economic Growth One of the best ways to predict the mortgage rates is by checking out our country’s major economic indicators. The unemployment rate, gross domestic product, government spending, imports and exports (among other things!) can all affect the mortgage rate. While our nation has experienced growth in recent years, the overall economy remains sluggish and the world economy has been turbulent.
2. Housing Market A booming real estate market generally pushes mortgage rates up, whereas a slower market pressures them downward. Currently, there is a fairly strong demand for real estate nationwide, but some markets remain stagnant due to lack of inventory.
3. The Federal Reserve’s Monetary Policy While mortgage rates aren’t directly tied to the Fed, they tend to fluctuate in tandem. In recent years, the Federal Reserve has held the Federal Funds Rate near 0.00% in an effort to stimulate the economy by allowing consumers and businesses to borrow money cheaply. Mortgage rates have also remained low. Economists speculate that the Fed may increase the interest rate soon — and we may see home loans climb too!