Despite All The Predictions, Mortgage Rates Finish 2014 Sub-4%

The latest weekly survey from highlights that the benchmark 30-year fixed mortgage rate rose to 3.99% from 3.96% last week, thus closing the year below the psychological 4% barrier.

In November, ValueWalk carried the Primary Mortgage Market Survey from Freddie Mac / Federal Home Loan Mortgage Corp, which highlighted that fixed rate mortgage rates are still hanging near 2014 lows driven by the October employment data.

Mortgage rates dropped in 2014

According to the national survey of large lenders, the benchmark 30-year fixed-rate mortgage rose to 3.99% from 3.96% last week. The survey notes the mortgage rates moved slightly higher for a second consecutive week, with the 30-year fixed rate mortgage having an average of 0.32 discount and origination points.

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Mirroring the trend, the average 15-year fixed mortgage nosed higher to 3.27% while the larger jumbo 30-year fixed mortgage held steady at 4.09%. The survey also highlights that adjustable rate mortgages were mostly higher as well, with the 5-year ARM climbing to 3.32% and the 10-year ARM stepping up to 3.83%.

The following table captures the weekly national mortgage survey:

The survey points out that one year ago, the benchmark 30-year fixed-rate mortgage rate was 4.69%, while four weeks ago, it was 4.07%. The survey also notes in 2014, the 30-year fixed averaged 4.3%:

30-year FRM-3 Month trend Mortgage Rates

Interestingly, the survey points out that despite forecasts pointing to a rate increase in 2014, mortgage rates dropped throughout the year, with the benchmark 30-year fixed mortgage rate ending 2014 under the 4% threshold, at 3.99 percent.

Mortgage rates likely to rise in 2015

The survey notes even with average home price appreciation of 5%, housing is more affordable now, with lower monthly payments on a larger loan than one year ago, by virtue of lower mortgage rates.  However, with would-be homebuyers contending with stagnant incomes, the housing market remains sluggish.

The survey predicts if wage growth materializes as anticipated in 2015, home sales will pick up as buyers’ reluctance slips away.

Illustrating a scenario, the report highlights that as 2013 came to a close, the average 30-year fixed mortgage rate was 4.69%. The report notes at that time, a $200,000 loan would have carried a monthly payment of $1,036.07. However, one year later mortgage rates are substantially lower. The survey notes with the average rate now at 3.99 percent, the monthly payment for the same size loan would be $953.68, a savings of $82 per month compared to one year ago.

The survey concludes by noting that mortgage rates tend to stay quiet over the holidays. However it suggests potential borrowers shouldn’t wait too long to get the process started, as mortgage analysts believe rates will head up next year.

Readers will remember that many ‘experts’ predicted rising rates throughout 2014.