21-Sep-18 – The economy and job formations may be on a roll nationwide, but if you are planning to buy a home this autumn, better hurry. The outlook for mortgage rates is up, up, and away.

That’s the latest forecast from Freddie Mac’s Primary Mortgage Market Survey which reported that home loan rates jumped over the past week to a level not seen in over a month.

Sam Khater, Freddie Mac’s chief economist, said the one-two punch of strong job and consumer credit growth drove mortgage rates up in mid-September to their highest mark since early August. “Mortgage rates are currently 0.82 percent higher than a year ago, which is the biggest year-over-year increase since May of 2014,” said Khater (left).

Benchmark 30-year fixed home loans averaged 4.6 percent nationwide for the week ending September 13, up from an average of 4.54 percent a week earlier. A year ago at this time, 30-year fixed loans averaged 3.78 percent.

Fifteen-year fixed-rate mortgages averaged 4.06 percent across the nation, up from 3.99 percent a week earlier. A year ago at this time, 15-year fixed mortgages averaged 3.08 percent.

On September 16, Chicago-area lenders were charging a range of 4.61 to 4.876 percent for 30-year fixed rate home loans, and 3.875 to 4.25 percent on 15-year fixed mortgages, according to RateSeeker.

Looking ahead, annualized comparisons for home loan applications may look weaker than they appear, Khater said. But that’s primarily because of the large spread between mortgage rates now and last September, which was when they reached their low for the year.

“Overall, this spectacular stretch of solid job gains and low unemployment should help keep home buyer interest elevated,” Khater predicted. “However, mortgage rates will likely also move up as the Federal Reserve Board considers short-term rate hikes this month and at future meetings.”

On June 14, the Fed raised its federal funds rate 0.25 percent for the second time this year to a range of 1.75 to 2 percent. It was the seventh rate hike since 2015, and it followed an increase in March of this year.

The Fed plans to raise interest rates two more times in 2018, three times in 2019, and once in 2020, ultimately pushing its benchmark federal funds rate to a range of 3.25 to 3.5 percent.

Therefore, home buyers who sit on the fence and wait another 18 months to two years could have to pay a 6.5 to 7 percent mortgage interest rate by 2020, experts predict.

However, some economists worry that the Fed’s aggressive tightening of monetary conditions could spark a sharp slowdown in growth next year. That could force the Fed into reversing course and begin cutting interest rates in 2020.