Eric Rosa Real Estate

MORTGAGE RATES HIT 2016 LOW: IS NOW TIME TO BUY

By Jeanine Skowronski  4.18.2016

Here's some good news for current house hunters: Mortgage rates hit a new low for the year last week. In fact, rates on a 30-year fixed mortgage are at the lowest mark since May 2013, according to the latest mortgage market survey from Freddie Mac.

The 30-year fixed-rate mortgage averaged 3.58% with an average 0.5 point for the week ending April 14, 2016, the mortgage purchaser reported. This rate is down from the prior week when it averaged 3.59%, and from a year ago when it averaged 3.67%.

Meanwhile, the 15-year fixed rate mortgage averaged 2.86% with an average 0.5 point, down year-over-year from an average of 2.94%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.84% with an average 0.4 point, down from 2.88% this time last year.

The weekly survey is based on responses Freddie culls from about 125 lenders on the rates and points for their most popular mortgage products.

What's Going on With Rates?

It was widely expected that mortgage rates would gradually rise in 2016 after the Federal Reserve began it's long-speculated move to raise the benchmark federal-funds back in December. (As a quick refresher: the Fed's benchmark federal-funds rate determines how much interest financial institutions pay to borrow from one another — and when it goes up, so does the prime rate, the lowest rate lenders will charge their most creditworthy consumers.)

The current decrease in mortgage rates is related to an unexpected increase in global demand for 10-year Treasuries at the beginning of the year amid global jitters over stagnating growth in China and its ripple effects, among other things, Lynn Fisher, Vice President of Research and Economics at the Mortgage Bankers Association (MBA), said.

But, barring another unexpected increase, further moves from the Fed should push long-term rates upward.

"MBA currently forecasts the Fed will make two more moves to increase rates this year, with the first rate hike forecasted for the June meeting," Fisher said in an email. "We think that mortgage rates will rise gradually through the end of the year, averaging about 4.2% in the fourth quarter."

Should I Buy Now?

For those thinking about buying a home in the very near future, it could be good to move on your purchase "to ensure getting a low-rate now" rather than face "the uncertainty in the future," Heather McRae, a senior loan officer for Chicago Financial Services, said.

Still, prospective homeowners shouldn't feel inclined to speed up their search or rush to make a decision, because interest rates are just one piece of the home-buying puzzle.

Home prices, for instance, tend to be higher in low-rate environments and fall in higher-rate environments as financing gets less affordable and demand goes down, Scott Sheldon, a senior loan officer at Sonoma County Mortgages and a Credit.com contributor, said. So, buying now could get you a lower interest rate, but waiting could get you a better deal on the home's purchase price.

At the end of the day, "you've got to kind of watch out for yourself," Sheldon said. "You have to make a decision based on what you feel you can handle."

Generally speaking, before shopping for a mortgage, you want to make sure you can meet down payment requirements, handle monthly mortgage expenses and safely cover other ancillary costs, like real estate agent fees, property taxes, home insurance, and repairs, to name a few.

You also want to be sure your credit score is in tip-top shape. Scores of 740 and higher generally earn the best terms and conditions on a mortgage, so, if you fall below that line, you may want to work on improving your credit score before you seriously look to buy a home. You can pull your free annual credit reports each year at AnnualCreditReport.com or see your credit scores for free each month on Credit.com to learn where your credit currently stands.