Despite a spike in mortgage rates, first-time home buyers are coming back
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Mortgage rates ticked higher on Monday: The average 30-year mortgage rate is 3.57%, which equates to a $452.96 monthly payment per $100,000 borrowed. A month ago, the equivalent payment would have been higher by $12.80.
If you were to opt for a shorter term, the average 15-year mortgage rate is 2.86%, which equates to a $683.87 monthly payment per $100,000 borrowed. A month ago, the equivalent payment would have been higher by $10.94.
First-time home buyers are coming back
According to the National Association of Realtors' (NAR) annual Profile of Home Buyers and Sellers, the proportion of sales to first-time buyers rose to 35% in 2016, following three straight years of declines. That share hit a 30-year low of 32% in 2015; the average over the 35-year history of the NAR survey is 40%.
"Fewer first-time buyers (40 percent) compared to a year ago (45 percent) indicated that the mortgage application and approval process was somewhat or much more difficult than they expected," highlighted NAR President Tom Salomone. Survey respondents indicated that debt of all types meant a median three-year delay in saving for a down payment, with first-time buyers carrying $26,000 in student debt. Roughly a quarter of first-time buyers (26%) said saving for a down payment was the toughest hurdle in the buying process.
The Fed meets this week, but the odds of a rate hike are low
The level of policy interest rates – and their expected path -- is an important element in determining mortgage rates. The Federal Open Market Committee – the Fed's rate-setting committee – meets this Tuesday and Wednesday. The interest rate futures market suggests the odds of a rate hike this week are just 16%; however, a December hike is thought to be much more likely, with an implied probability of 71%, according to data from Bloomberg. The interest rate cycle is turning slowly, but it is turning.
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