If you are planning to buy a home in 2017, you might be wondering what the outlook is for mortgage interest rates in the new year. Mortgage interest rates have remained at historic lows for the last several years but most experts agree that the trend is about to change. The continued improvement in the unemployment rates and other markers of economic recovery led the Federal Reserve to raise the overall federal interest rate another 0.25% in December 2016 (previous increase was December 2015).
Mortgage interest rates were hovering close to 3.5% for 30 year fixed mortgages for most of 2016 and looked as if they would remain there through the end of the year. However, after the election, the mortgage interest rates popped up over the 4% mark and have continued a slow steady climb. After the increase in the overall federal interest rate in December, analysts predicted rates would not drop back down below 4% and so far, that has held true.
So what does this mean for people looking to buy a home in 2017? From a historical perspective, mortgage interest rates will still be very reasonable and historically low. However, all signs point to rates that are higher in 2017 than the rates home buyers saw in 2016. At the turn of the year, mortgage interest rates ranged from 4.2% to 4.5%. Conservative analysts predict that 2017 mortgage interest rates will climb but ultimately hover between 4.3% to 4.7% through the end of the new year. More aggressive analysts predict that mortgage rates will slowly but steadily march upward throughout the year and top off just over 5% before 2017 comes to a close.
Despite the increases expected in mortgage interest rates, 2017 is still an excellent time to buy a home! Rates between 4% and 5% are still very affordable and worth taking advantage of - and are a far better deal than the historical high of 18.5% back in 1981!