Mortgage Rates To Continue Rising
Even with the modest rise, which will stem from economic growth and the resulting rise in overall interest rates, residential mortgage rates should stay comparatively low historically, keeping home buyers in the market.
“The overall level of interest rates for new homebuyers is still pretty reasonable. From a longer-term perspective, it looks pretty attractive,” said Mitch Stapley, chief fixed income officer for Fifth Third Bank in Grand Rapids.
“The rates are still going to be at a level where people are going to look around,” Stapley said.
“It’s not as good as 18 months ago, but in terms of affordability, people are going to be able to look at the housing market and still going to go out there and buy their house.”
Two recent national forecasts show mortgage rates inching upward in 2005.
The National Association of Realtors’ chief economist, David Learch, this month predicted that 30-year, fixed mortgage rates will rise slowly during 2005 to 6.5 percent, from the current national average of 5.7 percent. Rates should stay under 6.0 percent for the remainder of 2004, Learch said.
The Mortgage Bankers Association of America offered a similar outlook in late October, forecasting a “modest” and gradual rise in 30-year, fixed mortgage rates to 6.2 percent by mid-2005 and to 6.5 percent by the end of next year.
The association’s outlook is that rates will inch further upward in 2006, to 6.8 percent for a 30-year, fixed mortgage.
The forecast also indicates that mortgage rates will remain around 6.8 percent at least through mid-2007.
Both realtors’ and mortgage bankers’ associations see the residential housing market remaining strong for 2005, particularly for first-time homebuyers.
“As long as rates remain at these levels, home buying will remain an attractive alternative to renting and the purchase market will continue strong,” said Douglas Duncan, Mortgage Bankers Association’s senior vice president and chief economist.
The upward movement in mortgage rates will dry up refinancing activity and generates some concern about the affects on consumer spending, Stapley said.
He also said he sees housing sales remaining solid but “not going gangbusters.”
The National Association of Realtors projects that housing sales nationally for 2004 will end up growing 7.3 percent to 6.55 million units. The association predicts housing sales in 2005 will total 6.3 million units, a decline from 2004 but a level that exceeds 2003 and is still the second-best year ever.
In Michigan, home sales through the third quarter were up 4.45 percent over 2003, from 96,319 units to 100,605 units, according to the Michigan Association of Realtors.