2014 Interest Rates: Up or Down?


Seasonal prognosticators Punxsutawney Phil and General Beauregard Lee reached an impasse on Sunday as to whether we will experience six more weeks of winter or the delightful arrival of an early spring. Phil saw his shadow and predicted six more weeks of winter while the General predicted a crowd-pleasing forecast of an early spring. If only predicting the future of mortgage interest rates were as much fun as this match up.

In 2013, housing saw signs of spring with a small recovery matched by a small mortgage interest rate increase. Some experts reported a shortage in the number of homes available for purchase early in the year caused home prices to rise. Better terms on new-construction loans also led to an increase in the number of new home starts. While Freddie Mac reported a modest 1.12 percentage point increase from January 2012 to January 2013, the question on everyone’s mind is what 2014 holds for mortgage interest rates.

While almost no one is predicting a decrease in the mortgage interest rate for 2014, that’s exactly what we have seen recently. The Primary Mortgage Market Survey on the Freddie Mac Web site reported the average rate of a 30-year mortgage at 4.32 percent on Jan. 30. Mortgage prognosticators will have to wait to see if the Freddie Mac rate holds because the next update will not be posted until Feb. 6. However, the Bankrate.com report appears spring-like, reporting the average 30-year mortgage rate at 4.25 percent as of Feb. 4. Just as weather is impacted by multiple factors, mortgage rates are impacted by multiple factors, such as the housing supply, Federal block purchases of mortgage-backed securities, and mortgage loan availability. Add the economy to the mix, and even Punxsutawney Phil and General Beauregard Lee would be hard-pressed to make a call on this mud-wrestling contest.

So, what’s a potential home buyer to do? If you are in the market now, you may want to take advantage of this recent dip. A quick Internet survey finds experts predicting increases somewhere between 3 and 5 percent by the end of the year. Of course, those rates can vary based on the factors affecting your area. But, even with a rise of 3 to 5 percent, real estate is still a rock-solid investment with the potential of greater gains over time.



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