What will happen to Houston mortgage rates in 2013? The answer depends on whom you ask.
Freddie Mac, the government-backed mortgage giant, released its 2013 forecast in early December predicting that rates will remain near record low current levels in the first half of the year and then begin rising gradually in the 2nd half (still remaining below 4%). They also predict continued strength in the housing market as demand outpaces new construction. Freddie’s predictions have been fairly accurate over the past year as rates have stalled near record lows.
The Mortgage Bankers Association conversely believes rates will climb more significantly to 4.4% in the latter part of 2013, putting an end to the refinancing boom and sapping home affordability as real estate values continue to rise. Based on a $200,000 mortgage, the impact of this type of swell on rates would result in an increase of $124 per month from the current national 30-year fixed rate average of 3.3%. This inflation does not include the negative effect of potential increased mortgage insurance premiums previously announced by the Federal Housing Administration (FHA), homeowner’s insurance premium hikes, or potential increased property taxes due to the recent strength of the Houston economy.
Much of what happens with rates will be dependent on the economy and continued easing by the Federal Reserve. In 2012, the Fed announced in its “QE3” strategy that it would buy up to $40 billion of mortgages per month for an indefinite period to support the housing recovery. With the Fed as a buyer, this strategy has kept mortgage rates artificially low. Any move to halt this policy will have the immediate effect of increasing rates.
For homeowners considering refinancing their current mortgage loan, now is the time. The benefits of lower rates will not only provide significant long-term interest savings, but also have the potential to reduce the repayment term of your loan. Even borrowers who have refinanced in the past few years should have a Houston mortgage lender evaluate whether another refinance is financially beneficial.
For potential homebuyers, there are many incentives to moving forward with a home purchase. First, home prices in the Houston area are rising. According to the Houston Association of Realtors, single-family homes sales in November increased 27% on a year-over-year basis and the average home price increased more than 10%. Therefore, rock bottom deals are virtually impossible to find. Second, the current low rate environment has moderated the impact of home price increases. However, if rates do rise as expected, home affordability will, by necessity, rise.
Ultimately, the decision to purchase a home should not be based exclusively on mortgage rates and home prices. However, if a potential buyer’s personal circumstances support a home purchase, there will likely not be a better time than the present. To get pre-qualified or evaluate your purchasing power, click here or call us at (832) 286-1600.
Houston mortgage rates have continued to trend slightly lower this week. The Gross Domestic Production (GDP) report for the 1st quarter was announced this morning showing a 2.5% increase. This is seen as a disappointment in that the market was expecting a 2.8%-3.2% increase in GDP. Mortgage bonds are trading approximately 20 basis points higher as a result meaning rates will likely continue to improve slightly. No other significant fundamentals have influenced bond trading this week.
FHA Announces Implementation Dates for Mortgage Insurance Changes