As real estate specialists, it is our job to keep up with everything about the residential market including current trends, interest rates, historic data and forecasts about the market moving forward. We often rely on industry experts to keep us up-to-date on numbers, so we can pass them along to clients. One of our industry partners is Tammy Fiske Schulze. She is a Mortgage Loan Originator and owner of Brightside Mortgage here in Arizona. Tammy is an expert in her field, so we asked her to give us an update on interest rates right now and what the forecast is for next year. Here is what she had to say…

 

Interest Rates Right Now

“Residential interest rates are at or near the lowest in history and we are not expecting them to increase much, if any, into 2021. Historically, mortgage rates are low during a recession and we are in a very strange recession period. The timing and speed of the U.S. economic recovery once the pandemic is under control will affect what rates do in 2021. While we don’t expect rates to spike, we also do not expect them to drop much as I once did. Of course, as 2020 has proven, you never really know what’s going to happen next.

Interest rates were low before the Coronavirus hit us hard in March, but the pandemic really threw the mortgage industry into a tailspin. Mortgage volumes were huge at the time and lenders were trying to work their way through pipelines, but then during the pandemonium, the Fed announced rates would be 0%. So, we actually had the general public thinking they could get mortgage rates at or near 0%, which caused additional confusion and upheaval. In all of the confusion, the Fed failed to educate the general consumer that the Fed does not control mortgage rates directly and the when the Fed drops rates, that does not mean mortgage rates have dropped. Borrowers in current pipelines started jumping ship, believing that the rate they had locked in was no longer a good deal. This caused some lenders to “price out” of the market to slow volume so they could get their bearings.

Once the chaos started to clear up and rates started to normalize during the summer, loan volumes spiked again with a huge demand for refinance and purchase loans. Many lenders continued to price higher than the market would suggest just to curb the volume of business. For this reason, we believed that once the dust settled, we would see mortgage rates dip again. However, other factors have come into play, including the FHFA implementing a .5 point “Adverse Markets” penalty to every Conventional refinance file. This pricing hit will be effective for loans purchased by Fannie and Freddie on or after December 1st…which means lenders are going to try to have their refinance pipelines drained by mid-November. That should give everyone a breather, but we will see some continued slow-downs in purchase loan turn-times over the next 6 weeks as lenders get through those refinance loans.

All of this being said, mortgage rates for purchase loans are very low and quite a bit lower than mortgage rates for refinances. We expect to see extended turn times for the next couple of months and turn times will normalize by December. We do not expect purchase loan interest rates to increase significantly even after the election, regardless of how the vote goes. I would expect to see rates in the high 2s to mid 3s for 30 year fixed Conventional loans going into 2021. As the economy strengthens, I would expect to see rates tick up slowly, but I would not expect a drastic move either higher or lower anytime in the next 2 quarters.

The urgency in buying now is less about the interest rates and more about home prices. A home that is worth $300,000 today may be going for $310,000 in January, which equates to a difference of $50/month in mortgage qualification. As interest rates increase, as well, then home affordability decreases further.”

Here is an example:

buying power with low interest rates

Aren’t those stats amazing! Those were the rates as of October 5th, 2020. We have a ton of clients taking advantage of these amazing interest rates right now. If you are interested in getting pre-qualified or curious about what your payment might be on a new home, feel free to reach out to Tammy…

tammy fiske schulze

Success Real Estate Group is proud to partner with such amazing industry experts. If you ever have any questions about the real estate market, we are always here for you. We can be reached via email at info@southscottsdalehomes.com or by phone 480-945-1111.