Mortgage Rates Keep Housing on Track

June numbers show that low mortgage rates are keeping housing on track despite rapidly rising house prices, according to recently released date from Freddie Mac. The report examines current projections of homeownership rates in the years to come from among various experts, as well as the latest results on refinance statistics from current homeowners. So far, homeowners aren’t using cash-out refinances to over-leverage themselves.

“In this month’s Outlook, we review recent economic developments and their impact on our projections for the remainder of 2016 and all of 2017,” says Sean Becketti, Chief Economist, Freddie Mac. “We then shift our focus to the future of the homeownership rate and finally, we highlight recent trends in refinancing.”

Given recent data around Gross Domestic Product, expect growth rebound in the remaining quarters of 2016 to be at 1.9 and 2.3 percent in 2016 and 2017, respectively. Regardless of May’s disappointing employment report, expect unemployment to average 4.9 percent in 2016 and 4.8 percent in 2017.

The house price appreciation forecast for 2016 has increased by 20 basis points to 5.0 percent, and in 2017 by 40 basis points to 4.0 percent. During the first quarter of this year an estimated $10.9 billion net of home equity were converted to cash during the refinance of conventional prime-credit home mortgages, down from $11.0 billion in the fourth quarter of 2015 and substantially less than during the peak cash-out refinance volume of $84.0 billion during the second quarter of 2006.

Lastly, while there are wide variations in plausible scenarios around the future of the homeownership rate, they require many uncertain parameters, which makes it difficult to say with much confidence how the homeownership rate will evolve. This Outlook looks at these projections and sets the stage for further Freddie Mac analysis in the months to come.

“Despite the increase in cash-out refinances in the recent quarters, there is little risk of over-leveraging in the conventional conforming prime market,” says Becketti. “The median loan-to-value ratio for all prime conventional cash-out refinances was 69 percent in the first quarter of 2016. For comparison, it was 74 percent in 2000, 73 percent in 2001, and 71 percent in 2002. As we mentioned in last month’s Insight increased leverage — including greater utilization of cash-out refinancing — is an important trend to monitor. The latest quarterly data show no worrisome cash-out trends.”

For more information, visit

Get In Touch

Please send us your questions and comments. One of our team members will respond to you in a timely fashion.