June Mortgage Rate Forecast
I predict that mortgage rates will increase in June, by less than a quarter of a percentage point. The month started with a 30-year fixed rate mortgage averaging 3.03%, so my forecast is that the 30-year-old will end the month at 3.28% or less.
Most of the increase will occur in the second half of the month, following the June 15-16 meeting of the Federal Reserve’s Monetary Policy Committee. The Fed is likely to recognize the inevitable: that 2021 could be the year it begins to pull out of its easy money policies.
Trying to avoid a “temper tantrum”
The Fed has already reminded everyone that it will start tightening someday, so a policy change shouldn’t come as a shock to the system. If bond investors overreact anyway, their explosion will manifest as reluctance to buy mortgage bonds. By putting their noses on mortgage bonds, they would put upward pressure on mortgage rates.
The central bank found itself at a similar crossroads eight years ago. Back then, the Fed was doing what it is doing now: buying mortgage bonds to keep rates low and keep mortgage money afloat. At a press conference after the June 2013 monetary policy meeting, then Fed Chairman Ben Bernanke said “it would be appropriate” to start cutting back on his monthly mortgage bond purchases. later in the year.
The unruly bond market reaction has come to be known as the “taper tantrum”. Bond yields rose sharply, followed by mortgage rates. The Fed wants to avoid a repeat offense. If that succeeds, bond investors will simply pout.
What happened in may
In early May, I predicted that mortgage rates would not change much over the month. I said the 30 year mortgage rate would go up and down a bit day by day but stay between 2.875% and 3.25%.
This prediction was largely correct. The 30-year fixed-rate mortgage rate averaged 2.94% APR in May, up from 2.97% in April. Over several days, the 30-year slipped below 2.875%, which I hadn’t expected.
Low income borrowers get help with refi
The economic effects of the pandemic have hit Americans unevenly. On the one hand, you have people who could work from home, were paid well, and avoided long breaks in income. On the flip side, those with the lowest pay were more likely to have jobs they couldn’t do at home, and they lost income when businesses closed due to social distancing.
When mortgage rates fell for much of 2020, many successful homeowners refinanced their mortgages. They were able to qualify for new loans because they had kept their jobs, which allowed them to pay their bills on time and maintain good credit records.
Low income homeowners did not fare as well. More than $ 2 million have not refinanced, despite low rates, according to Mark Calabria, director of the Federal Housing Finance Agency.
The agency asked Fannie Mae and Freddie Mac to come up with refinancing options for low-income homeowners. Fannie’s program, called RefiNow, is scheduled to begin on June 5. Freddie’s program, Refi Possible, will roll out from August 30.
These programs will pay up to $ 500 for an assessment and waive the unfavorable market refinancing fees which acts like a half percent sales tax on mortgage refinancing.
To be eligible, borrowers must earn 80% or less of the region’s median income, live in their own single-family home, have not missed any payments in the past six months, and reduce the interest rate by at least one. half a percentage point. The mortgage must be supported by Fannie or Freddie, and the borrower’s credit score must be 620 or higher. Other eligibility restrictions apply.
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Holden Lewis writes for NerdWallet. Email: firstname.lastname@example.org. Twitter: @HoldenL.
The article Mortgage Outlook: June Rates May Rise If Bond Market Goes Wrong originally appeared on NerdWallet.
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