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Predicting economic patterns is a daunting task, but having a sense of where the housing market is going can help builders plan for the future. One question on builders’ minds: Will the low interest rates, which have sparked renewed buying activity, continue into the new decade? Tri Nguyen, founder and CEO of Network Capital Funding Corporation, says yes, meaning that the rock-bottom mortgage rates of 2019 are not going anywhere. Here are other financing predictions from Nguyen, who expects as a stable, yet cautious market.
Let’s face it: Predicting anything is difficult — usually impossible. While mortgage trends are no exception to this reality, evidence-based predictions do serve a useful purpose. They can help guide us on how to act — or not act — to maximize economic and regulatory conditions in a responsible way.
So, let us predict. Based on trends we have seen over recent months and even years, we can project that several trends will continue in the mortgage sector going forward. These include:
• Continued reduction in traditional rates.
• The continued popularity of cash-out mortgage refinancing.
• Homeowners continuing to shorten their mortgage terms while securing reduced rates.
• A decline in homeowners paying monthly mortgage insurance, where possible.
• Borrowers’ conservatism in the face of the ever-present potential for an economic downturn.
Let’s dig a bit deeper into each of these likely trends.
1. Due to the recent decline in interest rates, we should continue to see traditional rate reductions by lenders.
There was once credible speculation that 2019 would be the year that the Fed would increase interest rates in a significant way. Turns out, that was not the case. As the Fed has lowered its interest rate benchmarks throughout 2019, new borrowers have benefited from friendly mortgage interest rates, and older mortgages have remained ripe for refinancing.
Because there is a correlation between the Fed’s interest rates and interest rates on loans, mortgages included, it is likely that mortgage lenders will continue to reduce their rates as the Fed does. This will mean an active borrowing environment so long as low interest rates persist, as well as a prime opportunity for homeowners to refinance their existing mortgage to secure lower rates.
