If you missed the ultra-low mortgage rate boat, you might either be panicking and kicking yourself, and/or wondering if there will be another opportunity to get your hands on a record low rate.
Unfortunately, the outlook is pretty grim with regard to mortgage rates inching back to where they were just a month or so ago.
As it stands, mortgage rates on the 30-year fixed are just over 4% for the best borrowers, up from around 3.5% (or lower) back in early May.
It’s not as bad as you may think, especially if your loan amount isn’t too big. And historically, mortgage rates are still a great deal, if not a steal at current levels.
So What Does Fannie Think?
When The Daily Ticker asked Fannie Mae chief economist Doug Duncan if he felt rates would go down, he said rather bluntly, “We do not.”
And added, “if your budget supports the mortgage at today’s rates, I would lock.”
He basically likened floating your interest rate to being a “market speculator,” adding that any downside is “unlikely.”
In other words, you don’t want to get caught out even more if rates happen to rise, which tends to be more likely than the alternative at the moment.
There’s Some Good News Too, Honest
While that all sounds pretty bleak, Duncan sprinkled in a little bit of good news as well.
He said mortgage rates probably increased more than the Fed wanted, seeing that they’ve jumped about 60 basis points (.60%) or so from their recent lows.
As a result, he thinks the Fed will do their best to hold rates in place at current levels, meaning rates shouldn’t rise much from their present level of around 4% for a 30-year fixed.
However, there is sure to be some mild rate movement in both directions over the course of the next six months, seeing that mortgage rates pretty much always see daily fluctuation.
The hope is that the movement won’t be as meaningful, just little blips up and down, here and there.
Fed Testing the Waters
I’ve been following rates for a while now, and it almost appears as if the Fed is testing the waters to see how the market reacts to higher rates.
Clearly they’ve been low for a long, long time, and the market (and consumers) kind of got complacent about he whole thing.
When that happens, bad things typically follow – but now that everyone seems to have digested the news, mortgage rates may settle in at current levels.
If no one has a big problem with rates at 4%, the Fed will likely do their best to keep them there, until the next increase comes further down the line.
There may even be some improvement in rates in the near future because all the bad news and speculation that the Fed is going to slow its mortgage purchases is already built in.
So if they decide to extend their buying of mortgages, or not taper it as soon as market watchers are expecting, we could actually see a slight improvement in rates.
But as Duncan said, do you want to be a market speculator, or do you want to make a safe bet and grab a 4% fixed mortgage while you still can?
Remember, pigs get slaughtered.
Read more: Slow mortgage market could lead to loose lending.