The recent tax bill could cause the Federal Reserve’s rate increases to come faster—mortgage rates are expected to go up three or four times in 2018. This could push 30-year mortgage rates up past 4 percent in the new year.
Mortgage rates typically follow the Treasury yield. The federal funds rate sets the stage for the path mortgages will take. The Mortgage Bankers Association forecasts that mortgage rates will go up, but will stay below 5 percent.
“The Federal Reserve has begun reducing its holdings of Treasury securities and mortgage-backed securities, and this will put additional, modest upward pressure on mortgage rates,” said the MBA’s Chief Economist Mike Fratantoni. “We expect that the 10-year Treasury rate will stay below 3 percent through the end of 2018, and 30-year mortgage rates will stay below 5 percent.”
According to the MBA’s predictions, rates will increase to 4.6 percent in 2018, 5 percent in 2019, and 5.3 percent in 2020. The National Association of REALTORS® predicts rates to end the year at 4.5 percent, while realtor.com® expects mortgage rates to average 4.6 percent throughout the year and hit 5 percent by the year’s end.