Mortgage Rates Should Rise in 2015
Even though long-term mortgage interest rates declined for the majority of the last year, most analysts are predicting that higher rates will make a comeback in 2015. Most of those forecasts are based on the fact that the Federal Reserve has ended its bond-buying program and is likely to slowly start raising its target interest rates this year in order to combat inflation. Here’s a look at what the experts are saying:
Analysts at the mortgage rate tracking website believe that Fed actions will cause rates to rise in 2015. “The Fed is starting to lay the groundwork for the eventuality of interest rate hikes,” says Greg McBride, chief financial analyst for Bankrate.com. “It’s only prudent for consumers to prepare themselves as well.”
Bankrate predicts that the 30-year fixed mortgage rate will rise but not above 5 percent this year.
Economists at the mortgage giant see rates as being at the bottom right now. “We expect to see interest rates climb throughout 2015,” commented Freddie Mac vice president and chief economist Frank Nothaft. He foresees long-term rates following the 10-year Treasury upward, making their way to a maximum of 4.6 percent for this year.
Mortgage Bankers Association
The MBA predicts that mortgage rates will be heavily tied to the Federal Reserve’s movements. “QE3 is officially over. In the FOMC statement following the October meeting, the Fed clearly recognized the stronger economy and job market, seeing past the recent financial market volatility to recognize the improved growth prospects in the US for the year ahead,” wrote MBA economist Joel Kan in the Forecast Summary. The statement still suggests that there will be a ‘considerable time’ before the Fed increases short-term rates, but we expect this is consistent with a first rate increase in June or July of 2015.”
The MBA calls for a rate increase to 5 percent by the end of this year.
National Association of Realtors
NAR chief economist Lawrence Yun believes the Fed will start raising short-term rates sometime in the first half of this year, which will push mortgage rates up. He forecasts that long-term rates will rise to just below 5 percent by the end of 2015 and to 6 percent by 2016.
“The impact of rising interest rates on affordability will be minimal as long as job creation keeps pace,” he said in a statement. “Furthermore, if the credit box slowly begins to open up, that will also mitigate the impact of rising rates.”
It is important to remember that last year these same economists and analysts predicted mortgage interest rates would rise to 5 percent by the end of 2014. The reality is that long-term mortgage rates actually trended downward for most of the year, ending at an average of 3.87 percent, excluding fees on a 30-year fixed rate conventional mortgage according to Freddie Mac. Even with all the data at their fingertips, there is no way to know for sure what will happen to rates in 2015.