Mortgage Rates in 2019

The average rate for 30 year fixed mortgages dropped in recent weeks (Jan 2019) to 4.55%. Despite the often alarming reports that mortgage interest rates are going up, the worst claims are unjustified.

Here is an overview of what has happened to 30-year fixed-rate mortgages. This is based on an  average for lenders across the country, compiled every week by Freddie Mac, a corporation formed by Congress in 1970 to underwrite home mortgages.

• In 2016, mortgage interest rates dropped to a record low of about 3.4%.
• In 2017, rates rose rapidly to about 4%.
• In 2018, rates again rose rapidly to about 4.5% and peaked in November close to 5%. 
• In December 2018, rates began to drop from a peak of 4.94% and appear to be holding at 4.45%, a decrease of 8%. 

15-year fixed and 5-year adjustable rates are lower than 30-year fixed rate loans, both at about 3.9%.

What you can expect for mortgage rates in 2019

Economists are predicting an increase in rates to about 5% by the end of 2019. Here is a summary of their predictions:

Quarter 2019	Freddie Mac	Fannie Mae	Mortgage Bankers Assoc	National Assoc Realtors	Average
Q1	4.9	4.8	4.8	4.7	4.80
Q2	5.0	4.8	4.9	4.8	4.88
Q3	5.2	4.8	5.0	4.9	4.98
Q4	5.3	4.8	5.0	5.0	5.03

The mortgage rate is coupled to many factors: the bond market, political climate, world economic conditions, bank profits, the Federal Reserve rate, and more. The predictions in this chart are probably the worst case; the present direction suggests that rates could be lower. However, there have been sudden, large increases in rates in the past: a 24% increase in November 2016 and a 16.5% increase in January 2018. 

What does a change in mortgage rate mean for you?

If you buy a Marin home for $1,350,000 (the median sale price for a single family home in 2018), with a 20% down payment, here are the payments for a mortgage of $1,080,000 at different interest rates:

Mortgage Interest Rate	Monthly Payment
3.5%	$4,850
4.%	$5,156
4.5%	$5,472
5.0%	$5,798

Each 0.5% in interest rate results in a change of about $300-$325 in your monthly payment, for a loan of $1,080,000. 

Factors that affect your mortgage rate

There are many factors that can change your mortgage rate, including:

• A loan less or equal to $726,525 is a conforming loan (for 2019). Conforming loans usually have lower interest rates than Jumbo loans, over $726,525.
• Amount of down payment relative to the loan.
• The borrower’s debt-to-income ratio. This is the percentage of your monthly income used for recurring payments, including the new mortgage, car loans, and so on. This should be 45% or lower.
• The type of property.
• The borrower’s credit score and history.
• The lenght of the loan. It may be worth considering a shorter loan with a lower interest rate.

To navigate this complex process, we highly recommend that you consult a professional mortgage broker. We also recommend that you use a local mortgage broker with an established reputation in the community. This can give you the best deal and personal service. An established, local broker can also help you to buy a home when there are competitive offers; sellers and their real estate agents have higher confidence in closing the sale if the mortgage broker is known and respected.

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