Will Investment Property Mortgage Rates Decrease Soon?

investment property mortgage rates

Just one year ago, investment property mortgage rates were in the 3-4% range – historic lows that we’ve never seen before and may possibly never see again. In March of 2022, as the Federal Reserve Bank began its campaign of hiking interest rates to put a damper on rampant inflation, 30-year mortgage rates for both owner-occupied and non-owner occupied properties shot up to highs not seen since the fallout of the 2008 housing crisis. For a few months now, investment property mortgage rates have been hovering in the 8-10% range – more than double what they were just a year ago.

While the Federal Reserve has not backed down from its commitment to keep inflation down and has suggested that further rate hikes may be coming, there have been some signs in the housing market pointing to a break in the pattern of increasing rates. While we can’t predict the future with complete clarity or confidence, we can take a look at the signs around us and make an educated guess about where the market is going to go from here.

Owner-Occupied Mortgage Demand is Increasing as Rates Settle

For three straight weeks now, mortgage interest rates for owner-occupied homes have been softening, which has resulted in a 7% week-over-week increase in application volume, signaling higher mortgage demand according to the Mortgage Bankers Association’s seasonally adjusted index. Along with a 3% increase in purchase applications, applications for refinancing saw sharp gains, achieving a 15% week-over-week increase.

These increases are coming on the heels of bigger jumps in previous weeks, which some experts are pointing to as building momentum within the market. Mortgage rates for owner-occupied homes seemed to have reached their peak in October at 7.2%, and have since fallen back down into the low 6% range (hovering around 6.2% currently). Of course, this has no direct bearing on investment property mortgages, but trends on the owner-occupied side tend to signal what’s coming for real estate investors.

Year-Over-Year Data Shows the Market is Still Relatively Slow

Despite these week-over-week increases in demand applications, it’s important to note that year-over-year data still shows a tepid, more cautious market. Compared to February of 2022, purchase applications are down nearly 40% year-over-year, while refinance applications are down nearly 80%. Granted, the peak of the housing market boom saw incredibly high demand for low-interest rate mortgages, so comparing current mortgage demand to mortgage demand in the past couple of years can be a bit misleading.

A more accurate comparison would be to look at pre-pandemic years – and looking at where things were in 2019, the housing market was neither in much of a boom or a bust, but was pretty even-paced. At present, mortgage rates are still about 2 to 3 percentage points higher than they were in 2019, causing mortgage demand to be low compared to 2019 levels. With that in mind, it would appear that we are truly in a market slowdown for the time being.

Ultimately, Interest Rates Will Decline

Looking at multiple decades worth of data, we can’t say with certainty when or by how much interest rates will decrease. However, we are definitely at a point where interest rates are on the higher end of where they have been historically, which signals that they will eventually fall back to more investor-friendly levels. With this in mind, a lot of private lenders are offering adjustable rate mortgages for investment properties, as investors growing their portfolios are okay with making interest-only payments while waiting for interest rates to decline before refinancing at more reasonable rates.

Work With a Lender Who Has Your Best Interest in Mind

Beyond just interest rates, the team here at Pimlico Capital is always interested in serving our borrowers’ best interests. While we don’t control long-term investment property interest rates, we will always do whatever is in our power to ensure that our partners are getting the best possible deals on their rental properties. Whether you have hundreds of properties in your portfolio or are just getting started on your real estate investing journey, we’re here to serve your funding needs.

Have a property in mind, or just looking for some information regarding investment property mortgage rates? Give us a call at 410-855-4600 or fill out our online rate calculator for a quick & easy quote today!