Mortgage interest rate trends for 2019

interest rate trends 2019 - Mortgage interest rate trends for 2019


Find out what the current trend is for interest rates and what we can expect this year

The housing market is an industry on the move and whether it goes up or down depends on factors such as interest rates, home prices and the current economic climate. Here are thoughts on trends we might see in 2019 – especially with the recent decline in mortgage interest rates.

What is an interest rate and what can affect trends?

An interest rate is the cost you pay to borrow your mortgage, shown as a percentage. Banks and lending institutions base their rates on several factors. One is the Federal Funds rate, which is set by the Federal Reserve Bank. The Fed Funds rate establishes the interest banks charge other banks to borrow money overnight. This rate influences other rates including those for mortgages.

The bond market affects mortgage rates because bonds compete for the same money investors might also loan to homebuyers. When the yields on bonds rise, mortgage rates often rise to keep pace. Inflation, the economy, and the state of the housing market also affect the interest rate lenders decide to charge their customers for a home loan. Keep in mind interest rates will vary from lender to lender based upon an applicant’s income, credit history, debts, and other factors.

Mortgage rate trends forecast. Where will interest rates go in 2019?

Interest rates rose through 2018 and peaked in November. Looking at 30 year fixed mortgage rate trends earlier in the year, Freddie Mac forecasted they would be an average of 4.7 percent in 2019 and increase to 4.9 percent by 2020.

More recently mortgage interest rates have been declining, which is welcome news. Lower rates make housing more affordable. Lower interest rates also mean that people may be able to save money or reduce their monthly payments by refinancing their existing home loans.

Market trends – What will home sales look like in 2019?

This year could offer advantages to both homebuyers and home sellers. Declining interest rates make it easier for people to buy a new home. Taking the mortgage rate trends into account, Freddie Mac predicts home sales will increase modestly over the next two years. The majority of purchases will come from existing homes rather than new homes according to Freddie Mac.

At the same time, housing inventory is low in many areas across the U.S. – especially for homes that list below the national average, typically below $220,000. This means that home sellers may see strong demand for their houses and moderating interest rates may help them command good prices.

Another trend we will see in home sales for 2019 is the increase of homes being bought by millennials as first time home buyers. This segment is driving homeownership. A new study by Trulia and Harris Poll found that of Americans age 18-34, 21% say they plan to buy a home within the next 12 months, which is up from 14% last year.

Younger homebuyers are purchasing houses at higher rates in more affordable regions of the country. Millennials are buying homes in the Northeast, the Midwest, and the Mountain West. Popular cities for younger homebuyers include Pittsburgh PA, Provo UT, and Des Moines IA.1

Lower mortgage interest rates could benefit you

There are many ways lower interest rates can benefit homeowners. If your current interest rate is higher than today’s rates, you may be able to refinance your mortgage and save money each month with a new lower payment and save on interest paid over the life of the loan. If you have built up equity in your home, you might be able to get a cash-out refinance to pay for major expenses like home renovations or college tuition.

Finally lower interest rates mean buying a home can be more affordable for more people. Are you ready to realize the dream of homeownership?

Check out the home loan options available to you or speak with a Freedom Mortgage home loan specialist today.

1 From “The MarketPulse” published by CoreLogic, March 2019, Volume 8, Issue 3, page 4.