The Home Buyer's Korner

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December 24th, 2014

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Average Mortgage Rates for Dec 24th, 2014


Average mortgage interest rates moved up this week, but are still at 2014 lows, according to the weekly Freddie Mac Primary Mortgage Market Survey. The average rate on a 30-year fixed-rate mortgage was up to 3.83 percent from 3.80 percent last week, but still below a couple weeks earlier when rates were at 3.93. The average rates over the last two weeks have been the lowest so far in 2014, and the lowest dating back to mid-2013. 

We received disappointing news on housing this week, but mortgage rates still edged up slightly. The National Association of Realtors (NAR) reported that existing home sales plunged 6.1 percent in November and on Tuesday; the U.S. Department of Commerce reported that new home sales were down 1.6 percent in November.

The average rate on 15-year fixed-rate mortgages was up to 3.10 percent from 3.09 a week earlier, while average rates on five-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) rose to 3.01 percent from 2.95 percent last week. Average rates on one-year Treasury-indexed ARMs moved up to 2.39 percent from 2.38 percent as well.

Even with mixed news on housing its been a great year to be a home owner. The U.S. economy is expanding, the unemployment rate hit lows not seen since mid-2008, and 30-year fixed-rate mortgages fell from 4.5 percent at the start and currently just above 3.8 percent.

A 70-basis-point dip in 30-year mortgage for those of you who don’t have a real good understanding about mortgage interest rate simple equates to great news for home buyers and those who might have missed out on refinancing. On a typical $235,000 mortgage, 70-basis-points save home buyers $34,456 over the life of a 30-year mortgage.

But where are mortgage rates headed in 2015?

As the economy improves mortgage rates most assuredly will increase in 2015. The Federal Reserve is likely to begin raising short-term interest rates by mid year, pushing mortgage rates higher. Conversely, if a strengthening in the U.S. economy continues and other nations flounder it’s going to attract foreign investments, which is critical in stabilizing long-term lending rates near record lows.

Although no one can really predict global trends or what happens tomorrow here in the U.S., signs are looking good for us. The effects of significant global growth issues  like a collapse of the Russian economy, continued recession in Japan and a possible recession on the horizon in Europe, coupled with falling oil prices will create opportunity for the Federal Reserve maintain a liberal monetary policy and keep rates relatively low.

However lower oil prices at the pump are putting extra cash into the pockets of Americans and acting like a tax cut.  Consequently, Americans could begin pumping that cash back into the U.S. economy; further strengthening our growth, while creating a perception to the Fed’s that they need to increase interest rates sooner than the anticipated mid year target of 2015 in an effort to insure inflation is managed at a near rate of two percent.

The Mortgage Bankers Association is predicting that mortgage rates will slowly rise to five percent by the end of 2015. In its November economic and finance commentary, the MBA made the following statement:

“Although the Fed is taking “considerable time” before enacting its first short-term rate hike, the Bureau of Economic Analysis’ strong economic report, highlighting 3.9 percent GDP growth in the third quarter and 4.6 percent GDP growth in Q2, should lead to rate hikes by June or July 2015.”

This time of year there’s no shortage in predictions on where mortgage rates are headed next. The one important thing to remember is that there’s no surefire way to predict where mortgage rates will be headed; global growth will  determine that.

In July of this year, most economists had been predicting that the end of the Fed’s third round of quantitative easing, known as QE3 would lead to mortgage rates rising to five percent and here we sit today at near historical lows.

What we do know is that it’s a great time to financing a new home or refinancing your mortgage. Regardless of whether rates are heading to 3.5 percent or 5 percent, they’re still well below the average mortgage rate of the prior four decades. 

While it’s important to pay attention to mortgage rates today and in 2015, micromanaging and second-guessing isn’t worth your time. Simply put, rates continue to remain historically low and that’s a gift that could keep giving for years to come.

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