Mortgage rates increased late last week in the most popular mortgage surveys and reports, including those of Freddie Mac, Bankrate and Zillow. While we know by now that the U.S. employment report for January was the main driver of those interest rate increases for conventional fixed-rate and adjustable-rate loan products, most reports did not mention that the upbeat jobs report was also a key variable when it came to Federal Housing Administration (FHA) mortgage rate upticks.
According to Freddie Mac’s weekly survey for the week ended February 12, 2015, 30-year FHA-backed fixed mortgage loans were at 3.69 percent, a slight increase in interest rate, but still low enough to keep 30-year FHA mortgage rates close to their historical lows. That 3.69 percent rate also applied to conventional 30-year FRM products.
As for 15-year FRMs and 5-year ARMs, both products stayed below the 3 percent threshold, despite ticking upwards in the aftermath of the January jobs report. Rates for all these mortgage products happen to be much lower than they were about one year ago to this date, when most financial experts were predicting 2014 to be the year when 30-year FRMs hit 5 percent again.
As recently as December 2014, former Freddie Mac chief economist Frank Nothaft released a retrospective report called “A Look Back at Five Predictions for 2014.” In the article, Nothaft was quoted as saying that mortgage rates for all popular home loan products would make a gradual rise throughout 2014, as they were trending upwards at the start of the previous year. Instead, “quite the opposite happened,” as mortgage interest rates spent most of the second half of 2014 moving on a downward path. This applied to both conventional mortgages and FHA mortgages, as the second half of the past calendar year was very consistent, with a few increases but a general downward trajectory.
There is statistical evidence to back up what Nothaft said in his late 2014 retrospective, and what others have said in their own opinion pieces or blog posts. At the beginning of calendar 2014, 30-year FRMs averaged 4.53 percent on Freddie Mac’s survey. But by the tail end of 2014, interest rates for 30-year fixed products had slipped to 3.87 percent – that is 66 basis points, or two-thirds of a percentage point, lower than the year-ago figure. As FHA and conventional mortgages are at 3.69 percent on the Freddie survey, that puts interest rates a good 84 basis points lower than they were in the first week of 2014.
However, housing market prognosticators remain convinced for the most part that mortgage interest rates will finally move up in 2015, with 30-year FRMs, conventional or FHA, expected to be in the 4.50 percent to 4.70 percent range, depending on which number-cruncher you ask. And while certain probabilities – an improving housing or employment market, improvements for the broader U.S. economy, an early Federal Reserve interest rate hike – could make these forecasts more likely in the coming months, we have to remember that even the most astute market analysts were absolutely wrong when they made their mortgage rate predictions for 2014.
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