2016 Mortgage Interest Rate Forecast

2016 marked the beginning of rising interest rates across all industries. For the last 10 years, the Federal Reserve has been assisting the market in order to promote buying. This year that program ends, and we start the slow and steady rise of interest rates. While most industries are seeing a dramatic increase in interest rates, the Real Estate industry has remained steadfast at low and consistent rates which should carry us through 2016. 

I had a Q&A session with John Musso, who is nationally ranked 2nd at Wells Fargo Home Lending, to get to the facts about new interest rates. Here’s why the housing market shouldn’t be freaking out about the interest rate changes.

Gradual Interest Rate Increases

According to John Musso, the most important thing to remember is: Gradual Increases. What that means is the national government isn’t in a race to pre-recession mortgage rates. Instead, changes will be instituted gradually to ensure a healthy and growing national economy. Furthermore, the end of the 10 year Federal Reserve program is going to have a nominal effect on the current consumer. The biggest change will affect the banks and big lenders that are affected by newly instated programs and regulations aimed at cleaning up the process.

TRID Regulations in 2016

However, 2016 does mark significant changes for home buyers looking for a loan. It’s actually easier now. The new TRID regulations introduced in October of 2015 have established a consistent loan application and process. That means 30 to 45 day loans and a consistent application designed for the laymen. Understanding interest rates will make settling that much easier when negotiating for that dream home. 

Read more about TRID Regulations and how they affect home buyers visit.

Historically Low Mortgage Rates

The Federal Reserve plans to increase interest rates over the next couple years. While the rise will be slow and steady, we are currently experiencing what some are predicting to be a lifetime low. 

According to CNN, “The current rate on a 30-year mortgage is 3.97%. That's incredibly low by historical standards. Most experts don't think mortgages will go much higher than 4% anytime soon.” Which is great, because that makes home buying and selling that much easier.

While CNN calls this a “historical standard,” it’s important to remember that the increase will be gradual and adaptive for the economy’s needs. 

Home Prices Are Stabilizing

All across the country we see home prices stabilizing after the recent boom that home sellers experienced. That’s great news for home buyers. Home prices are expected to rise only 3.5% according to Zillow Chief Economist Svenja Gudell. Combine that with the low interest rates, and it seems like 2016 is going to be a great year to buy a house! 

Check out my past article on “Home Prices Stabilizing in the San Fernando Valley” to get a better picture of how the selling market will be changing in 2016.

It’s a Good Time to Refinance

While Mortgage and interest rates are projected to stay low for some time, most forecasters predict that this is the lowest they will be for awhile. That means homeowners looking to refinance should start the refinancing process.

Investment Properties

For people that are looking to buy a rental income property, rent prices are going to continue to climb. Rent prices have been on the rise for several years with the increased demand in short-term housing, 2016 will continue to contribute towards that trend as rent prices continue to rise, making an investment property or two a sound investment. 

Jumbo Loans Interest Rates in 2016

There is a lot of talk about the 5% interest line and the effect on homes priced in the millions. John Musso assured us that this fear is misplaced. Home buyers looking to purchase a luxury home have another option: A Jumbo Loan.

A Jumbo Loan is designed for home buyers with a low debt-to-income ratio, a good credit score, and a larger downpayment. Jumbo Loans allow home buyers to receive loans above the $417,000 cap on most conforming loans. Not only that, but Jumbo Loans are at a historical low this year. There’s no time like the present! (USA Bank, Jumbo Loans). 

2016 Mortgage Interest Rates Forecast

After talking with John, I’m comfortable saying that 2016 should be another great year for home buying trends to continue to gradually rise. The slow increase will give buyers a large window of opportunity as they shop the more reasonably priced homes that are starting to fill the market. Hungry buyers will benefit from the low rates and sellers will be happy to see deals closed quickly with the new TRID Regulations. 

View the Full Video Q&A


John Musso is nationally ranked 2nd at Wells Fargo Home Lending.

John can be reached at (818) 380 - 3322

If you have any questions about interest rates, home lending or buying a home: 

Call Matt Epstein (818) 789-7408