Can You Believe What Mortgage Interest Rates are Doing?

I hear Baby Boomers say, "Can you believe what mortgage interest rates are doing? They have been incredibly low for so long!" Then I hear Millennials say, "Can you believe what mortgage interest rates are doing? They are getting so high!" So who is right?

Currently, fixed rate 30-year mortgages are at 4.38%, which is about a full percentage point over what they were a year ago. Sure, you can say that they are 29% higher now, but that is a pretty narrow view. Let's take a look at rates over the last few decades.

Chart

You can see that even at the current rate, the cost of a 30-year fixed mortgage is historically very low. The monthly Principal and Interest Payments in the right column are based on a $200,000 loan. My fellow Baby Boomers can remember buying homes in the 80's when rates were at their highest.

HSH.com, the nation's largest publisher of mortgage and consumer loan information was recently quoted as saying, "Certainly, at these levels, mortgage rates should not be a significant deterrent to buying, let alone considered 'high' by any stretch of the imagination, but for some, perhaps they seem so."

So, where are rates heading? Freddie Mac is projecting that 30-year fixed rate mortgage rates will be at 5.7% in the 4th quarter of 2015. Fannie Mae is saying they will be at 5% and the Mortgage Bankers Association is predicting 5.3%. So how does that look graphed out beside mortgage rates over recent history?

Graph

Freddie Mac was recently quoted as saying, "One thing seems certain: we are not likely to see average 30-year fixed mortgage rates return to the historic lows experienced in 2012." So the Millennial who bought their first home in 2010 might think the world is coming to an end if rates go as high as 6%, but those of us who bought homes in the 80's are in heaven with rates under 6%. Perception can seem like reality, but the width of your view can really change it.

Jon Niemeyer is the Broker/Owner of EXIT Realty North Star, 1039 Sunset Dr Norwalk, IA 50211. We provide full service real estate services to the Des Moines, Iowa metro area. Find links and contact information for Jon at JonNiemeyer.com.

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