Are Mortgage Interest Rates Expected to Rise or Fall?

There are a lot of things to consider when taking out a home mortgage loan. One of the most important elements of a mortgage is the interest rate, and whether you choose to take out a fixed-rate or a variable-rate loan. The current and future interest rates can have a big impact on what type of loan you choose and what you end up having to pay.

Fixed-Rate Loans

When you choose a fixed-rate loan, it means that the interest rate will stay the same throughout the duration of the loan. This can be both a good thing and a bad thing. Keep the following in mind about fixed-rate loans:

  • If the interest rates fall, your mortgage interest rate will stay the same. This means that you could end up paying above what the current interest rates are.
  • If the interest rates go up, your mortgage interest rate remains the same, which means you could actually be saving money since you’ll be paying less than what the current rates are.
  • You’ll always know how much your mortgage payment will be since the interest rate will always be the same.

Variable-Rate Loans

Unlike fixed-rate loans, variable-rate loans change according to what the current interest rate is. If interest rates drop, this is a good things since your mortgage payments will end up going down as well. However, if interest rates rise, you’ll end up having to pay more.

Not to mention that you’ll never know how much your mortgage payments will be since they will fluctuate, which can make it hard to budget.

Interest Rate Predictions

Because of the uncertainty over growth in Japan and Europe – specifically the recent vote by Britain to leave the European Union – the Federal Reserve is not likely to raise interest rates at any point during the rest of this year. In fact, the predicted diminished growth in Europe as a result of “Brexit” and the possibility of Japan entering a recession because of the high value of the Japanese Yen could actually cause interest rates to drop.

However, short-term interest rates, such as the bank prime rate, may be raised at least once by the end of 2017. This will be partly because of the start of upward wage pressure, which will cause inflation expectation to rise just a bit – something that will strengthen the case for slightly higher interest rates.

As far as fixed-rate mortgages go, it’s expected to remain low throughout next year, making it a good option for buyers who don’t feel comfortable with the fluctuation associated with a variable-rate mortgage. Fixed-rate mortgages are expected to stay around 3.5 percent through 2017 – and some fixed-rates may even drop a little bit lower.

Mortgage Lender in Maryland, Virginia & Washington, DC

Interest rates look like they’ll hold steady for the next year or so, although there may be a slight bump next year in correlation to potential wage increases and inflation. For more information about interest rates or mortgages in general, be sure to contact Alex Echeandia today.


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