Mortgage Interest Rates Expected To Continue Falling Until Hitting 2.9 Percent Next Year

Fannie Mae issued their monthly housing forecast for April which includes, among other data, a forecast of what mortgage interest rates will be in the coming months.  Last months forecast had projected that mortgage rates would continue to decline moving forward but only to a low of 3.1% before the end of 2021 while the April forecast predicted the interest rate on a 30-year fixed-rate mortgage would fall to 2.9% in the 2nd quarter of 2021 and stay there through the balance of the year.

If you’re able, now’s the time to buy!

While the effects of the COVID-19 pandemic, such as job loss, is going to take some would-be home buyers out of the market, for those that are still able to buy, now is a great time to buy a home.  There are many factors that play in favor of buyers today, such as the fact that there are about 1/3 fewer of them (buyers in the market) now than this time last year, sellers that want to have fewer people coming through their homes and interest rates.  As our chart below shows, not only are rates low now, they are projected to go much lower even.

Why not wait until next year when the rates hit their lowest?

Good question, but there are several reasons not to wait.  First off, the rates shown on my chart are “projections”, or to put it another way “an educated guess”, so there is no guarantee rates will actually come down as predicted.  In addition, once the stay at home orders go away and we start moving back to something closer to normal, I anticipate there will be a flood of buyers to the market which, along with lower interest rates (if that happens) will likely drive home prices up.  So, for buyers that are able, they may get a better buy today, with less competition, still get a good interest rate and then if rates do fall as predicted can easily refinance to take advantage of lower rates.

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Fannie Mae Mortgage Interest Rate Forecast April 2020 (Chart)

Fannie Mae Mortgage Interest Rate Forecast April 2020 (Chart)

Data source: Fannie Mae – Copyright ©2020 St Louis Real Estate News, all rights reserved

The Truth About The Mortgage Interest Deduction

Before I begin, I should point out that what I’m about to tell you runs contrary to what the National Association of REALTORS® (NAR), the largest trade association in the country and one I belong to and support, will tell you.  The NAR position on the mortgage interest deduction (MID) is, quoting from their website, “the mortgage interest deduction (MID) is a remarkably effective tool that facilitates homeownership.”  Many St Louis REALTORS® will echo the message of NAR but I think if more people took the time to look into the MID, and do a little simple math, they would see that the mortgage interest deduction does not appear to offer any real benefit to the ordinary, typical homebuyer in St Louis.

What brought this to mind this morning was a friend of mine on Facebook (who is a loan officer for a St Louis mortgage company) posted a link to an article written  by an owner of a Chicago real estate company outlining the benefits of the MID and, while I think he did an excellent job of laying out the potential tax savings of deducting mortgage interest and property taxes on a home, I think he left out a key component, namely, the Standard Deduction.

Why the MID doesn’t help the normal home buyer in St Louis:

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Continue reading “The Truth About The Mortgage Interest Deduction

What borrowers need to know about mortgage bankers;  St Louis mortgage rate update

Recently I was contacted by a prospect that was referred to me from a past client.   This prospect was interested in a VA loan and had some general questions about the loan process and VA loans.  He had mentioned he was currently working with the VA on some credit issues, but the process was taking a long time.  It turned out, the prospect was “working” with a mortgage company that had “VA” in their name and there was no affiliation with the VA.  I’ve seen this happen numerous times with both VA and FHA where a prospective homebuyer contacts or is contacted by a lender that implies they are who they are not.  Know  who you are dealing with. Continue reading “What borrowers need to know about mortgage bankers;  St Louis mortgage rate update