Mortgage Outlook: If Bond Markets Work, Interest Rates May Rise in June | Real Estate –

Holden Lewis

June Mortgage Interest Rate Forecast

I predict it Mortgage interest rate In June, it will rise by less than a quarter percentage point. The month started with an average of 3.03% 30-year fixed rate mortgages, so my prediction is that 30 years should end at less than 3.28%.

Most of the increase will occur later in the month after the June 15-16 meeting of the Federal Reserve Board’s Monetary Policy Committee. The Fed may admit that it is inevitable. It means that 2021 may be the year to start withdrawing from the monetary easing policy.

Trying to avoid the “tapered tram”

The Federal Reserve Board has already reminded everyone to start tightening someday so that policy changes do not shock the system. If bond investors overreact anyway, their blast turns out to be reluctant to buy mortgages. By raising their noses with mortgage bonds, they will put upward pressure on mortgage rates.

The central bank was at a similar crossroads eight years ago. At that time, the Fed was doing what it is doing now. That is, buying mortgage bonds to keep interest rates down and keep your mortgages flowing. At a press conference after the June 2013 Monetary Policy Conference, then-Federal Reserve Board Chairman Ben Bernanke said it would be “appropriate” to begin declining monthly mortgage purchases later that year. Stated.

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The unruly reaction of the bond market has become known as the “tapered tram.” Bond yields soared, followed by mortgage rates. The Fed wants to prevent a recurrence. If that succeeds, bond investors will simply speak out.

What happened in may

At the beginning of May, I predicted that mortgage rates wouldn’t change much during the month. I said that the 30-year mortgage rate fluctuates little by little every day, but stays between 2.875% and 3.25%.

The prediction was almost correct. The 30-year fixed rate mortgage rate averaged 2.94% in April, compared to 2.97% in April. In a few days, 30 years fell below 2.875%, which I hadn’t expected.

Low-income borrowers get help from refi

The economic impact of the pandemic has hit Americans unequally. On the one hand, there are people who can work from home, are well-paid, and avoid long-term interruptions in their income. On the other hand, low-wage people are more likely to get jobs that they cannot do at home and lose their income when the business is closed due to social distance.

Many prosperous homeowners when mortgage rates fall throughout most of 2020 Refinanced their mortgage.. As they continued to work, they were able to qualify for a new loan, pay invoices on time and maintain a good credit record.

Low-income homeowners did not work either. More than two million people did not refinance, despite low interest rates, according to Mark Calabria, director of the Federal Housing Finance Agency.

The agency instructed Fannie Mae and Freddie Mac to come up with refinancing options for low-income homeowners. Fanny’s program, RefiNow, will start on June 5th. Freddy’s program, Refi Possible, will begin on August 30th.

These programs pay up to $ 500 for valuation, Unfavorable market refinancing fees This serves as half the sales tax on refinancing your mortgage.

To qualify, the borrower must earn less than 80 percent of the median income in the area, live in his or her home, have not missed payments in the last six months, and have reduced interest rates by at least 0.5 percentage points.Mortgage Supported by Fannie Mae or Freddie May, And the borrower’s credit score must be 620 or higher. Other eligibility restrictions apply.

The article “Mortgage Outlook: Interest Rates in June May Rise If Bond Markets Fail” was first published in Nerd Wallet.

Mortgage Outlook: If Bond Markets Work, Interest Rates May Rise in June | Real Estate

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