People looking to buy a house or refinance an existing home loan have a three to six month window before mortgage rates move appreciably higher, Quicken Loans CEO Bill Emerson said Thursday, a day after the Federal Reserve increased short-term interest rates for the first time in more than nine years.
"We don't believe that mortgage rates are going to rocket up anytime soon. You have an opportunity here in the next six months to take advantage of still very, very historic low mortgage rates," said Emerson, also chairman of the Mortgage Bankers Association. "Based on what … [the Fed] telegraphed, we don't really see a significant shift in 2016." Central bankers indicated four rate hikes next year.
Leading up to the Fed's Wednesday decision, the average 30-year fixed-rate mortgage rose slightly to 4.09 percent, according to Bankrate's Dec. 16 survey of large lenders. That rate compared to 3.94 percent a year ago.
"We've seen a little volatility in the marketplace. But you're still seeing [mortgage] rates pretty much in the same place that they were 30-60 days ago. They're pretty much in the same place they were 12 months ago," Emerson said, despite the Fed's "over-telegraphed move" of a quarter of a percentage point increase in the fed funds lending rate.
That's because mortgage rates tend to track the 10-year Treasury yield, which has not moved as much as the short end of the yield curve in advance of the Fed hike.
"Any move to 4.5 percent to 4.75 percent or even close to 5 percent [on 30-year mortgages] doesn't necessarily impact somebody buying a home, because I think rates are still very, very low in the scenario," Emerson said. "I think you're going to have to get north of 5 percent for that to start really having an impact on what people can buy and what they can afford." He doesn't see that kind of rise happening until sometime in 2017.
The 15-year fixed-rate mortgage increased to 3.34 percent from 3.27 percent this week, while the 5/1 adjustable was virtually unchanged at 3.42 percent, according to Bankrate.
"If you're in an adjustable rate, floating mortgage, and thinking about getting out of that, now is exactly the time to do that," Emerson said, while reminding homebuyers that adjustables have been a great deal in recent years as the Fed kept the funds rate near zero percent since December 2008.
As for the overall housing market, he said, "It's getting gradually better." But he added there's a segment that's been lagging — first-time homebuyers who typically make up 40 percent of the market but are currently about 31 percent.
He attributes that trend to some apprehension but largely to education. "I still believe people out there think they have to have 20 percent down to buy a home. That's simply not the case. You can do as little as 3.5 percent down [or] 5 percent down in most cases." Government programs allow qualified buyers such low down payments.