The year started with widespread predictions of a gradual rate rise to between 4.5% and 4.65% by year end. Almost immediately, however, those forecasts were threatened by the early year collapse in stock markets.
2016 began in much the same manner as we'd seen for some time previously, with external factors having a negative effect on investor confidence. This time it was the Chinese stock market crash, almost as soon as the year began, that caused widespread risk aversion for some considerable time to follow.
When investors are risk shy, they tend to buy bonds and it so happens that mortgage rates are most directly affected by the fortunes of bonds. Indeed this was a trend that continued to inform low rates through most of the year. And when the UK voted for Brexit, world markets were sent into near meltdown and we subsequently saw rates traveling even further south, to below 3.5% for a 30 year fixed rate home loan.
As we reported in the first of our annual reviews, it can surely have been no coincidence that the low cost of borrowing incentivized the significant return of the first time buyer during 2016.
Mortgage rates had been predicted to rise steadily for a few years, but something had always stepped in to affect confidence, be it disappointing financial news at home, acts of terrorism or international tensions. As such, low rates had arguably been riding their luck for some time and, as we were always keen to mention in our blogs, the situation simply could not continue indefinitely.
And so it proved to be following the election in November. A stock market rally saw rates beginning to rise and they haven't stopped climbing since.
Much has been written about the effect this will have on the real estate market in 2017 and, while rising mortgage rates cannot be called good news, it's equally true to say that all we have been seeing recently is, in effect, a very long overdue market correction. While nothing in this modern world of ours is ever certain, it seems likely that the ultra low rates we saw earlier this year may not be seen again for a long time, if ever.
So while those who took fully advantage of the situation should be congratulated, it should still be remembered that, on any historic scale, rates are relatively low and there is still a great chance to lock in an extremely attractive rate for the life of the home loan. We just have to get used to the fact that a more normal market has returned, reflective of improved confidence in jobs and the economy.
In November we wrote about why rates are still competitive, looking back at how mortgage rates have fared over the past decade and the 10 years prior to that. We're still a very long way from the average 30 year fixed rate of 6.41% in the previous real estate boom period in 2006. And how about the average at the turn of the century - rates averaged 8.05% in 2000!
So we end the year when rates have finally climbed to nearer where they were predicted to be, but still below the generally forecasted levels. While it's a shame that the very, very low rates haven't continued, we should not lose sight of the fact that buying a home has rarely been more affordable.