Mortgage rates may move toward 4% this fall, and maybe go lower. A number of factors are in play.
Are Mortgage Rates Now Trending Lower?
Mortgage rates are unpredictable. On any given day, rates could move higher or lower, or rates can stay the same. Sometimes, mortgage rates move by a lot. Sometimes, they hardly move at all.
It can be tough to shop for "today's lowest rate" because rates are a moving target. Yet, that's what "rate shopping" is all about -- it's checking with multiple lenders for the best combination of mortgage rates-and-fees so you don't overpay on your loan.
Historically, rate shopping was simple.
For many years, mortgage rates changed once per day, if even. Furthermore, products were few. If you wanted a 30-year fixed rate mortgage, that's what you got. With 20 percent down, you went conventional. With less than 20% down, you went FHA.
Military borrowers had the additional choice to use VA financing.
In recent years, though, rate shopping has become more complicated. In addition to rapidly changing mortgage rates, there is a plethora of loan products available to today's home buyers which did not exist last century.
Today, if you're putting less than 20% down, the FHA is not your de facto loan choice.
With a 3 percent downpayment and good credit scores, you may opt for the Conventional 97 program, for example. Or, with 10% down in a healthy housing market, you may find Fannie Mae loans to be cheapest for you over the long-term.
Plus, it tough to pin down rates. This is because rates for government-backed loans -- whether through the FHA, VA, Fannie Mae or Freddie Mac or the USDA -- are based on the price of mortgage-backed securities (MBS) and mortgage-backed securities have been volatile since last decade's financial market downturn.
Banks no longer fix mortgage rates once per day. Today, rates change 5 times daily or more. It makes true "rate shopping" next-to-impossible.
Thankfully, though, home buyers can look at the market's longer-term trends to guess where rates may go next. Mortgage rates often move in cycles and, this season, rates appear headed for a fall.