Mortgage Rates Outlook For Home Purchase And Refinance

This BLOG On Mortgage Rates Outlook For Home Purchase And Refinance Was PUBLISHED On May 1st, 2019

Mortgage Rates Outlook for 2019 seems promising.

In this blog, we will discuss Mortgage Rates Outlook for 2019.

Mortgage Rates Outlook For 2019

Mortgage interest rates often fluctuate constantly. When rates are published, the rates are par rates for prime borrowers with 740 FICO or higher and 20% down payment. Par rates are the benchmark. The ultimate mortgage interest rates are determined by the overall risk factor of the borrower. These risk factors on each individual borrower are called Loan Level Pricing Adjustments (LLPA) or Pricing Adjustments.

Alex Carlucci, a senior vice president of Gustan Cho Associates states the following:

Combine “base” rates – driven by actively traded pools of mortgages known as Mortgage-backed securities (MBS) – with your loan level pricing adjustments and you get your mortgage rate. If you have ever played the stock market you know that Wall Street can be erratic and irrational. Mortgage-backed security trading is no different. MBS pricing and trading respond to influences on the economy, including the Federal Reserve, the U.S. jobs market, as well as developments abroad (the Middle East, China, Europe, etc…). Since mortgage-backed securities are considered a “safe haven” investment by international investors, strife in the European Union, the Middle East – or wherever – often drives investors to seek investment safety in the waiting arms of MBS. This is sometimes referred to as a “flight-to-quality”. Since the price of mortgage-backed securities and your mortgage rate have an inverse relationship – they move in opposite directions – mortgage rates drop during “flight-to-safety” events. That is a large part of why you are still seeing such low mortgage rates now. According to Freddie Mac’s Primary Mortgage Market Survey (PMMS) rates remain near historical lows.

Government Loans (FHA, VA, USDA) normally have lower rates than conventional loans due to the government guarantee. The government guarantee means less risk to lenders. Therefore, less risk means lower risk while higher risk by lenders means higher mortgage rates.

Predicting The Market

Nobody has a crystal ball and can predict what the outcome of rates will be in the future. However, with the FED’s announcing they will not be increasing interest rates this year, Mortgage Rates Outlook for 2019 looks promising. Rates have already dropped significantly so far this year. Many analysts and experts are predicting a promising 2019. Many borrowers who closed on their mortgage last year closed them at rates higher than 5.0%. Today, rates are hovering in the low 4.0’s. We are beginning to see a large increase in FHA and VA Streamline Refinances due to sharply lower rates. Low rates in 2019 mean more buying power to home buyers and big savings for homeowners thinking of refinancing.

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