Get in while the gettin’s good.
That’s one way to sum up what homebuyers should know about mortgage rates in 2014.
Of course, there’s a little more to it than that, so if you’re looking to get the best possible rate in 2014 you should be aware of where mortgages stand and where experts think they’re going.
What’s happening now The good news is that rates are still attractive right now. In January, the average commitment rate on a 30-year, fixed-rate mortgage was 4.43 percent, according to Freddie Mac. That’s up from last year, but still lower than the annual average of every year from 2011 back to 1971. (Freddie Mac was chartered by Congress in 1970.)
The bad news? Rates will continue to rise. How high they rise depends on two things: the Federal Reserve and the economy. Here are a couple of ways those two factors are affecting rates.
The Fed is scaling back its economic stimulus program The Fed has reduced its bond purchasing program, which helped to keep mortgage rates low. As it continues to scale back on bonds, rates will likely increase.
Investors just aren’t that into mortgage notes According to Reuters, “Upbeat trade data from China and an optimistic economic outlook from Federal Reserve Chair Janet Yellen whetted investors’ appetite for risk.”
So what does that have to do with mortgage rates? Confident investors don’t buy safe investments like mortgage notes — they bet on riskier (and more profitable) investments. That usually means that mortgage rates will go up.
Predictions for 2014 It’s likely that mortgage rates will rise above 5 percent this year, according to the Mortgage Banker’s Association (MBA).
“We expect mortgage rates will increase above 5 percent in 2014 and then increase further to 5.5 percent by the end of 2015,” said Jay Brinkmann, MBA’s Chief Economist and Senior Vice President for Research and Education in a press release. “As a result, mortgage refinancing will continue to drop, and borrowers seeking to tap the equity in their homes will be more likely to rely on home equity seconds rather than cash-out refinances.”