Housing Loan Interest Rate 2018 Overview and Insights

In 2018, the housing loan interest rate landscape underwent significant changes, with several key factors influencing the market. The Reserve Bank of India (RBI) reduced the repo rate, which directly impacted the housing loan interest rates.

This reduction in repo rate led to a decrease in housing loan interest rates, making it more affordable for homebuyers. The average housing loan interest rate in 2018 was around 8.5%.

The RBI's move also led to a surge in housing loan demand, as buyers took advantage of the lower interest rates. Housing loan growth was particularly strong in the second half of 2018.

The Fed has already hiked rates this year, and another increase is expected in December, making a total of four rate increases this year.

The Fed's benchmark federal funds rate hike didn't directly affect mortgage rates, but it contributes to an overall environment of rising rates.

Twelve out of 16 Fed meeting participants predict one more hike in 2018, which might be disappointing for those waiting for rates to go down.

Homebuyers might be better off not waiting for rates to drop, as home prices could be 10 to 20 percent higher by 2020, negating any rate savings.

Historical data shows that interest rates have been above 10% until 1995, and then dropped significantly over the next few years.

Interest rates have been relatively stable since 1998, ranging from 8% to 4.5%.

The Fed might lower the fed funds rate if there's an economic pull-back, which could prompt mortgage rates to drop as well.

FHA mortgages are a great option for home buyers who may not qualify for conventional loans, offering similar or even lower interest rates.

FHA loan rates averaged 4.95% in August, while conventional loans averaged 4.94%, according to Ellie Mae.

VA loans, on the other hand, require zero down payment and come with the lowest rates of all loan types, averaging 4.74% for 30-year mortgages in August.

Most lenders will accept scores down to 620 or even lower for VA loans, and you don't pay high interest rates for low scores.

USDA loans also offer no down payment and ultra-low rates, making home payments even lower than rent payments in some cases.

Historical data shows that interest rates exceeded 10% for the first time in 1974 and remained above 10% until 1995. This period saw interest rates drop from 17% in January 1990 to 8.75% in June 1994, a significant decrease in just four years.

Interest rates have since tracked within a band of approximately 8% and 4.5%, with a notable exception in August 2008 when they rose to 9.6%. This volatility highlights the importance of keeping an eye on inflation rates, which can have a significant impact on interest rates.

Inflation rates can affect interest rates in a significant way, as seen in the past. For example, in March 2022, the quarterly inflation rate was 5.10%, which would also apply to April and May 2022. This kind of data is essential for making informed decisions about home loans.

Considering the impact of inflation on interest rates, it's no wonder that many homebuyers are looking for ways to refinance their mortgages before interest rates rise again. In fact, our team of expert mortgage brokers can help you find the best rates and loan options for your individual situation.

If you're a first-time homebuyer, you may want to consider a basic interest rate product, which can be a cost-effective option. Basic products usually don't come with an offset account or linked credit cards, but they also often come with lower ongoing fees. Over a 30-year loan, the difference in fees between a basic product and a full-featured packaged product can total over $11,000.

Conventional loans are a popular choice for homebuyers and refinancers, offering competitive rates and flexible terms. The 30-year mortgage rate for conventional loans averaged 4.94% in August, according to Ellie Mae.

You can use conventional loans to refinance or purchase a home, but be aware that lower credit score borrowers may face higher rates. Conventional loans are best suited for those with decent credit and at least 3% down, with 5% down being preferable.

With a conventional refinance, you can eliminate FHA mortgage insurance, which can save you hundreds of dollars per month. This is a big deal, especially if your interest rate goes up.

Conventional loans can also help you pay off any loan type, including Alt-A, subprime, or high-PMI loans. If you have adequate equity in your home, a conventional refinance can be a great option.

Getting rid of mortgage insurance is a significant advantage of conventional loans. According to the article, mortgage insurance can cost you hundreds of dollars per month, but with 20% equity, you can eliminate it altogether.

The USDA loan program is a great option for home buyers, especially those in rural areas. No down payment is required, making it more accessible to those who might not have the funds for a traditional mortgage.

Home payments can be even lower than rent payments, thanks to ultra-low rates. This is especially true with the USDA streamline refinance, which allows current USDA loan holders to refinance without a new appraisal or income qualification.

Qualification is easier with the USDA loan program, as the government aims to spur homeownership in rural areas. This means home buyers might qualify even if they've been turned down for another loan type in the past.

Today's mortgage rates are still relatively low, and you can get a rate quote within minutes over the phone or online. This is especially true if you're considering an FHA loan, which can offer similar or even lower rates than conventional loans.

According to Ellie Mae, FHA loan rates averaged 4.95% in August, just slightly higher than conventional loans at 4.94%. If you're not sure which type of loan is right for you, it's worth exploring the benefits of FHA loans.

One little-known program, the FHA streamline refinance, lets you convert your current FHA loan into a new one at a lower rate if rates are now lower. This can be a great option if you're looking to save money on your mortgage payments.

Here are some key facts about today's mortgage rates:

Homeowners have accumulated a staggering $14 trillion in home equity, but many are struggling to tap into it. A cash-out refinance can be a viable option, despite its drawbacks.

A cash-out refinance replaces your first mortgage and gives you cash back for the new loan amount that exceeds your old one. This can lead to a potentially higher rate, plus additional closing costs.

You can avoid exposure to rising interest rates with a cash-out refi, as it locks in a certain rate and stays there as long as you keep the loan. This is a major advantage over home equity lines of credit (HELOCs).

Consider a scenario where a homeowner needs $50,000 cash. Shortly after taking a HELOC, the Federal Reserve hikes rates to 2007 levels. In this case, the HELOC payment would increase significantly, but a cash-out refi payment would remain the same.

Here's a comparison of the two options:

As you can see, a cash-out refinance can provide a more stable and predictable payment, making it a more attractive option for homeowners who need to tap into their home equity.

Mortgage rates have already surpassed predictions made by major housing agencies. In fact, the Mortgage Bankers Association predicted 30-year fixed rates to be 4.7% in 2018, but they've already surpassed that.

The good news is that 30-year fixed rates are still in the 4s, a range that was considered impossible just a few years ago. This is a great opportunity for homebuyers and refinance candidates to lock in a good rate.

According to the Mortgage Bankers Association, 30-year fixed rates are predicted to be 5.2% in 2019. Freddie Mac is also predicting a 30-year fixed rate of 5.1% in 2019.

Here's a summary of the predictions from major housing and financial authorities:

It's worth noting that everyone is predicting higher rates, so today's rate might be as good as we'll see for years to come.

This month's economic calendar is packed with events that could impact the housing loan interest rate. Fed Chair Jerome Powell speaks on October 2, which could signal a shift in monetary policy.

The nonfarm payrolls, wages, and unemployment rate will be released on October 5, providing insight into the labor market's health. Higher-than-expected numbers could lead to increased interest rates.

Consumer Price Index (CPI) data will be released on October 11, serving as a key indicator of inflation. A rising CPI could indicate a stronger economy and potentially higher interest rates.

Here is a list of upcoming economic events that could impact the housing loan interest rate:

It's essential to keep an eye on these events, as they could influence the interest rate.

The economy's unstoppable momentum is a problem, and it's not just because it's making it hard to find a good deal on a mortgage. The unemployment rate is at 3.9%, a very low number that means there's now less than one unemployed worker for every available job.

This worker shortage will eventually lead to inflation as companies pay more to hire and retain workers. These firms then pass on those costs via higher priced products.

The current state of the economy is a far cry from 2009, when there were more than 6 unemployed workers for every available job. This "workers market" is good for people in general, but not so good for those looking to buy or refinance a home.

Inflation is bad news for mortgage rates, and it's a simple equation: hot economy = inflation = higher mortgage rates. The definition of inflation is higher prices for goods and services.

If you're in the market for a home mortgage, the best advice is to lock in as soon as you can. We won't be getting off this economic tour de force for a while.

The next month is packed with market-moving news that could impact rates.

Fed Chair Jerome Powell speaks on October 2, which could set the tone for the month.

On October 5, we'll get a glimpse into the labor market with the release of Nonfarm Payrolls, wages, and the unemployment rate.

The Consumer Price Index, a key inflation gauge, will be released on October 11.

Retail Sales data will be out on October 15, giving us insight into consumer spending.

Two big events are scheduled for October 17: Housing Starts and the release of FOMC Minutes.

Existing-Home Sales data will be released on October 19.

New Home Sales will be reported on October 24.

Finally, the GDP will be released on October 26, giving us a snapshot of the overall economy.

The data on housing loan interest rates in 2018 is quite telling. The average interest rate for a 30-year fixed-rate mortgage was 4.54%.

In some areas, interest rates varied significantly. For instance, the average interest rate in California was 4.31%, while in Florida it was 4.65%.

The 5-year adjustable-rate mortgage had an average interest rate of 3.93% nationwide.