Five Predictions for the 2017 Mortgage Loan Market

Near record-low mortgage rates makes now a great time to purchase a home, but the Five Predictions for the 2017 Mortgage Loan Marketmortgage market can turn on a dime, and pressure on the Fed to raise rates and the incoming Trump administration are throwing some variables into the mix.

No one can tell the future, but years of experience have given Chicago mortgage brokers insight into historical patterns and key indicators. For the upcoming year, mortgage lending experts have identified the following trends:

  • Rates will increase – Rising wages and an improving labor market is putting pressure on the Fed to raise interest rates. Mortgage experts are predicting that average rates for 30-year mortgages will rise to 4.2 percent in 2017 and 4.6 percent in 2018.

It’s inevitable that interest rates will rise. The Great Recession saw them plunge to historic lows as the Fed used rate-cutting to prop up a moribund economy. Now that the gradual recovery that began in the late 00s is accelerating, the time has come for rates to rebound.

  • Expect privatization of Freddie Mac and Fannie Mae – With a Republican president and GOP majorities in both houses of Congress, it’s highly likely that Fannie and Freddie will be privatized, a long-held goal of Republicans who wish to reduce the government’s involvement in the housing market. Steven Mnuchin, nominated by President-Elect Trump to be Treasury Secretary, has Home prices may dropalready indicated that he will push for privatization. Privatization could cause headaches for some potential buyers, as Fannie and Freddie are the primary guarantors of 30-year mortgages, the most popular mortgage product.

 

  • Home loans may decrease – It stands to reason that higher rates will make some potential home buyers leery of pulling the trigger on taking out a mortgage. A recent rise in rates has already had a negative impact on loan originations and refinancing. A recent report from the Kroll Bond Rating Agency predicts that origination volume will drop by 20 percent in 2017.

 

  • Home prices may drop – The silver lining to higher rates and fewer loans for home buyers may be lower prices for homes. If rates increase appreciably and fewer people are in the market for loans, sellers may have to reduce prices to sell their homes. As of November 2016, the median home price – the price that half of all home prices are above and half of all prices are below – was $234,900.

Right now could be the best time to purchase a home before various changes bake into the mortgage market. Your individual financial situation will likely be the deciding factor on whether now is the right time to apply for a home loan.

Chicago mortgage brokers with A and N Mortgage can help prospective home buyers find the best mortgage programs for their individual financial situations. A and N Mortgage will take an in-depth look at your finances and offer expert guidance for navigating the confusing world of mortgage loans. In addition to these services, the company also provides real estate buying and selling assistance to clients.

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