Although the Federal Reserve raised interest rates Dec. 16, rates charged for home mortgages reached all-time lows in February. The prospect of additional Fed rates hikes in 2016 caused a short-term uptick in mortgage rates in early March. As market fears subsided, mortgage rates drifted lower. Recently, lenders have been quoting rates of 3.875 percent or lower based on the credit worthiness of the buyer. While rates can vary slightly from day-to-day, this move lower is important as it is beneath levels from which mortgage rates have previously bounced higher. In the past, mortgage rates have risen above 4 percent after approaching 3.875. Staying below this inflection point signifies that rates will remain low and possibly go lower in the short term. It also means that homebuyers shopping for their next home do not have to be anxious that rates will rise dramatically.
Despite the recent move, rates are unlikely to reach previous lows. The best option for homebuyers is to speak with a mortgage lender and ask about locking in a preferred rate. You can either select the current rate or let the rate float until it reaches a target and then lock in the rate that will apply to your future home loan. The second option enables you to take advantage of the near-term trend toward slightly lower rates, but it does pose the risk that rates may increase in the future. Now may be the optimum time to purchase as the longer-term trend is for higher rates.
