US mortgage interest rates are expected to fall in 2016, according to a survey of US mortgage brokers.
But analysts say the US market remains vulnerable to another slowdown in the second quarter.
A survey of about 200 mortgage brokers published by the US Mortgage Bankers Association (MMBA) and conducted in early February found that interest rates would fall in the next three months, with average rates for those who own mortgages up nearly 15 percentage points, from a peak of $1,500 a month in April.
The survey of nearly 2,000 mortgage brokers in the US, the largest and most prestigious industry group in the United States, found that the US housing market would continue to experience rapid price growth, with mortgage rates increasing between 0.5 and 0.8 percentage points a year.
That growth rate would be slower than the 1.5 percentage point rate of growth observed in the third quarter of 2015, which saw mortgage rates rise by 0.9 percentage points.
The MMBA survey, which is based on data collected by the Federal Housing Finance Agency, also found that mortgage rates were still higher than they were a year ago, at 3.4%, compared with 3.1% a year earlier.
While the MMBA’s survey found that average monthly mortgage payments were rising at a 2.3% annual pace, it also found the average monthly loan payments were still below what it would take to provide a cushion against rising interest rates.
“The real question here is how will this [rate] slowdown affect mortgage rates in the years to come,” said Tom Fessenden, the MMMA’s president.
“As the economy slows, the economy will need to borrow to sustain a balanced financial position.”
The MMMA said the median monthly interest rate paid by borrowers was $1.80 per month, up 0.2 percentage points from the last survey in April and the lowest in six years.
The average monthly payment on a five-year fixed-rate loan was $2,827, up 3.7 percentage points on a year later, and about 6.7% higher than the median annual payment in the previous survey.
Finance Minister Arun Jaitley said the government had taken measures to boost the affordability of home loans.
“Our plan is to continue the upward pressure on home loan rates by increasing the size of the FHA-insured mortgage portfolio, by extending the repayment term and by expanding the number of qualifying borrowers in the program,” Jait, a member of the BJP, said in a statement.
The government said it would review the mortgage rate review process and work with the US Federal Housing Administration to ensure it complied with all the regulatory requirements.
The rate of the MMAA survey was released in response to a new analysis from the US Department of Housing and Urban Development (HUD).
The report found that a significant number of borrowers are now underwater on their mortgages and are not saving enough to make up for the interest payments.
“This analysis highlights the urgent need to increase the supply of mortgage-backed securities by the FHFA, and to ensure that we have sufficient resources available to support the FHS’s ability to meet the FHLDA’s goal of providing FHA insured borrowers with the financial support they need to remain solvent,” HUD said in its release.
The US government said the analysis also found “a significant gap” between the cost of a home and the cost to repay a mortgage.
The study found that an average $1 million loan would cost the average US homeowner about $5,000 more over the next five years than a typical $500,000 loan, according the study.