Tag Archives: interest-rates

11/26/2024 · 7:20 pm

Mortgage Rates Forecast into 2025 – Will they Go Down?

Many experts expect rates to fall below 6% in 2025, but the forecast is far from guaranteed. In January 2023, some analysts thought that rates would be around 4.5% by the end of 2024, which is obviously not happening.

Fed Chair Jerome Powell says it best: “Forecasting’s are highly uncertain….Forecasting is very difficult.”

Rates will likely continue moderating in 2025 and 2026 but will stay relatively high as long as the economy keeps outpacing expectations, but over-all economists don’t anticipate a dip into the 3% or 4% range in the foreseeable future.

Here are the mortgage rate predictions as reported by US News:

• Fannie Mae: Rates Will Average 5.7% in 2025

The October Housing Forecast from Fannie Mae puts the average 30-year fixed rate at 6% by year-end, a decline from 6.5% in the third quarter. All told, the mortgage giant predicts mortgage rates will average 6.6% in 2024 and 5.7% in 2025.

• MBA: Rates Will Fall to 5.9% in 2025

The Mortgage Bankers Association predicts in its October Mortgage Finance Forecast that mortgage rates will fall from 6.5% in the third quarter of 2024 to 6.3% by the fourth quarter. The industry group expects rates will fall to 5.9% in the third quarter of 2025 and will continue declining to 5.9% in late 2025 and early 2026.

• NAHB: Rates Will Average 5.94% in 2025

The National Association of Home Builders expects the 30-year mortgage rate to average 5.94% in 2025, falling to 5.69% in 2026, according to its October Housing and Interest Rate Forecast. The trade group is forecasting that “sustained, sub-6% mortgage interest rates” will begin in the second quarter of 2025, something it previously forecasted to happen in the fourth quarter.

• Wells Fargo: Rates Will Average 5.86% in 2025

In its latest U.S. Economic Outlook, the Economics Group of Wells Fargo Bank puts the 30-year conventional mortgage rate at 6.3% in the fourth quarter of 2024 – a slight increase from when rates dipped in the third quarter. Wells Fargo economists predict that the average rate will dip below 6% in the second quarter of 2025, which is pushed further out from their previous forecast that expected sub-6% rates in the first quarter.

Gena Glaze

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02/14/2024 · 11:08 am

What’s Really Happening with Mortgage Rates?

Are you feeling a bit unsure about what’s really happening with mortgage rates? That might be because you’ve heard they’re coming down. But then you read somewhere else that they’re up again. And that may leave you scratching your head and wondering what’s true.

The simplest answer is: that what you read or hear will vary based on the time frame they’re looking at. Here’s some information that can help clear up the confusion.

Mortgage Rates Are Volatile by Nature

Mortgage rates don’t move in a straight line. There are too many factors at play for that to happen. Instead, rates bounce around because they’re impacted by things like economic conditions, decisions from the Federal Reserve, and so much more. That means they might be up one day and down the next depending on what’s going on in the economy and the world as a whole.

Take a look at the graph below. It uses data from Mortgage News Daily to show the ebbs and flows in the 30-year fixed mortgage rate since last October:

If you look at the graph, you’ll see a lot of peaks and valleys – some bigger than others. And when you use data like this to explain what’s happening, the story can be different based on which two points in the graph you’re comparing.

For example, if you’re only looking at the beginning of this month through now, you may think mortgage rates are on the way back up. But, if you look at the latest data point and compare it to the peak in October, rates have trended down. So, what’s the right way to look at it?

The Big Picture

Mortgage rates are always going to bounce around. It’s just how they work. So, you shouldn’t focus too much on the small, daily changes. Instead, to really understand the overall trend, zoom out and look at the big picture.

When you look at the highest point (October) compared to where rates are now, you can see they’ve come down compared to last year. And if you’re looking to buy a home, this is big news. Don’t let the little blips distract you. The experts agree, overall, that the larger downward trend could continue this year. 

Despite the ups and downs, many analysists predict mortgage rates will, over-all, move in a slow declining path as the year progresses, but many factors can influence the trajectory and so only time will tell.

Check current rates at Freddie Mac

Gena Glaze

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01/05/2024 · 11:39 am

What is a 2-1 Buydown?

Sellers, including home builders, will sometimes use 2-1 buydowns as an incentive for potential purchasers

A 2-1 buydown is a concession or incentive negotiated with a seller or builder that temporarily reduces a buyer’s mortgage interest rate by 2 percentage points the first year and 1 percentage point the second year of your mortgage. The third year the interest rate goes back to the fixed rate obtained from the lender.

  • A 2-1 buydown is a type of financing that lowers the interest rate on a mortgage for the first two years before it rises to the regular, permanent rate.
  • The rate is typically two percentage points lower during the first year and one percentage point lower in the second year.
  • Sellers, including home builders, may offer a 2-1 buydown to make a property more attractive to buyers.
  • 2-1 buydowns can be a good deal for homebuyers, provided that they will be able to afford the higher monthly payments once those begin.

Lenders charge an additional fee to make up for the interest that they won’t be receiving in those early years. A homebuyer or seller can pay for a buydown. That payment may be in the form of mortgage points, or a lump sum deposited in an escrow account with the lender and used to subsidize the borrower’s reduced monthly payments.

The 2-1 buydown is sometimes offered as an incentive and sometimes it is part of the buyer’s negotiations.

Example

Suppose a new home builder is offering a 2-1 buydown on its new homes. If the prevailing interest rate on 30-year mortgages is 6% for a particular buyer, this homebuyer could get a mortgage that charged just 4% in the first year, then 5% in the second year, and 6% starting in year three and continuing through the remaining years. The reduced payments in those first two years can result in substantial savings.

Gena Glaze

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