b"With Allen Robinson, Founder and President of First Trust Mortgage Corp
Interest rates affect us all, so it\\u2019s good to get the scoop from an expert to see exactly how much of a change is on the horizon for 2017 with a President Trump in the Oval Office.
Allen Robinson is the President and Founder of First Trust Mortgagee, specializing in providing residential mortgages, and, therefore, is the perfect expert to address some of our concerns.
Rumors of an end of the year interest rate hike by the Federal Reserve have been twirling the wind for some time now, but since the election\\u2014possibly because of an anticipation of accelerating economic growth and a pickup in inflation\\u2014we\\u2019ve already had a hike of 0.5% in 10 days. Even so, rates are still relatively low with 30-year fixed-rate conventionals hovering around 4% and 15-year fixed rates in the low threes, at 3.25
Interestingly, says Allen, we\\u2019re now at the same place we were in January 2016, and, so, after a dip in mid-summer, we\\u2019re ending the year where we started.\\xa0 In spite of the rise in the fixed rates, the adjustable mortgage rates have not gone up nearly as quickly, creating a gap that most likely will continue. A seven-year adjustable (meaning that the rate is fixed for the first seven years and then changes in the years thereafter) today is going at a rate of 3.5% for those first seven years.
Looking back into the history of mortgage rates.
If the specter of rising interest rates is causing anxiety, a look into the past should quell those fears.
The averages for a 30-year mortgage:
In the 1970s\\u20148.86.
In the 1980s\\u2014in the 12s and 13s
In the 1990s\\u20148.12
In the 2000s\\u20146.29
Today, that average is 3.94.
What will 2017 mean for the first-time home buyer?
Interest will rise affecting first-time home buyers, many of whom will be millennials going from the bar scene to life in the domestic lane. What they carry with them in many cases, unfortunately, is student debt. Adding that financial burden to higher mortgage rates and increased home prices, and you can see the financial challenges they\\u2019ll be facing. Typically, says Allen, millennials are putting down only 3% and then borrowing more, which, in turn, means they\\u2019ll have to pay private mortgage insurance to cover the loan-to-value gap on their home.
Who is the keeper of your mortgage?
Allen deals strictly with residential mortgages, of which, locally, 35 to 40% are FHA loans. It may come as a surprise to learn that all conventional loans are eventually bought by either Fannie Mae or Freddie Mac, meaning that the government actually owns the mortgage market and that banks are only pass-through institutions, taking their bit off the top to service these loans. As a consequence of this set-up, says Allen, \\u201cthe government is directly involved in keeping these rates as low as they've been.\\xa0 We'll see what happens as the new Trump administration moves in.\\u201d\\xa0
The industry outlook is looking good for the moment, says Allen. \\u201cHere in South Florida, our biggest competition to the mortgage industry is people paying cash for their properties.\\xa0 The other stimulus is that rents have gone up so high that, in my world, if you keep the interest rates below 8%, it's still more affordable to buy a home than it is to pay rent at these ridiculous rates.\\u201d\\xa0
In spite of uncertainty over the direction of our new government in the coming year, it\\u2019s good to know, should you be in the market to purchase that new home, that the sky won\\u2019t be falling on it anytime soon."