Mortgage loan rates expected to drop significantly; how to strategize
OAKLAND, Calif. - With the Federal Reserve expected to begin lowering interest rates next week, a lot more people with pent-up demand to buy or sell a house will be wondering when to go to the housing market.
Even without a Federal Reserve interest rate cut, mortgage interest rates have hit an 18-month low. "The rates dropped even before the Fed announcement because we're expecting a minimum of a quarter percent drop and lenders have already priced that in," said Origin Point Lending SVP Fif Ghobadian.
Fact is, lenders cannot make money unless they lend it to the relatively few folks who feel they can afford it. So, to finance loans, lenders price compete with other lenders. "We do expect rates in '24, the remainder of '24 and '25 to drop significantly. You know, predictions are in the mid-fours," said Ghobadian.
So, should you wait it out for lower rates or, by now, the refinance? "I would say, if you wait for that extra quarter, extra half, extra three-quarters of a percent drop, you may be facing a bigger slew of buyers who drive the home prices up," said the loan executive.
WASHINGTON - JANUARY 22: The Federal Reserve building is seen January 22, 2008 in Washington, DC. (Photo by Chip Somodevilla/Getty Images)
Add to that, some homeowners, with mortgage rates in the four percent range, may decide to sell and accept a slightly higher rate. That would put more homes on the market as well as lots more folks bidding up prices for them.
As rates go down, do not assume you will get the rate advertised by the lender, rates reserved for the most qualified buyers. "There's so many factors: your credit score, the type of property you have, the equity you have, whether you're self-employed, your debt-to-income ratio; just so many factors that affect the interest rate," said Ghobadian.
The Fed will do what the Fed will do, but everyone, consumer and businessperson, is always looking for clues. Finance pros look only one place. "So, the most important thing that we're going to be listening to and it's gonna be the biggest market mover is Jerome Powell's comments," she said.
However, one enormous borrower, the federal government, will also compete because, for the first time ever, the annual interest payments on the national debt, will surpass one trillion taxpayer dollars. That's enough to buy 2.8 million median priced U.S. homes.
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