Mortgage Interest Rates End 2014 on Positive Note, Freddie Mac, Bankrate Surveys Reveal

Although, mortgage rates climbed up slightly in the final Freddie Mac Primary Mortgage Market Survey of 2014, interest rates on 30-year fixed-rate products were nonetheless well below the crucial 4 percent mark, a huge contrast to the rate increases forecasted to manifest by the end of the recently concluded year.

According to Freddie Mac’s survey for the week ended December 31, 30-year fixed-rate mortgages finished 2014 at 3.87 percent, a slight four basis point increase from the prior week’s 3.83 percent. Last year, 30-year FRMs were at 4.53 percent. 15-year FRMs, which were previously at 3.10 percent, added five basis points to 3.15 percent, which is still 40 basis points lower than the year-ago average of 3.55 percent.

Mortgage Interest Rates End 2014 on Positive Note, Freddie Mac, Bankrate Surveys Reveal

5-year Treasury-indexed adjustable-rate mortgages held steady at 3.01 percent, but ended 2014 four basis points lower than the previous year’s year-ending figure of 3.05 percent. Lastly, 1-year Treasury-indexed ARMs were up by a single basis point from 2.39 percent to 2.40 percent, or 16 hundredths of a percentage point lower than the year-ago average of 2.56 percent.

“While mortgage rates edged up this week, they remain near 2014 lows. Looking at full-year data, the 30-year fixed-rate average for 2014 was 4.17 percent, the highest annual average since 2011”, observed Freddie Mac vice president and chief economist Frank Nothaft in his weekly statement. The reason for 2014’s full-year average for 30-year fixed mortgage rates being the highest since 2011 was because rates were extremely close to, if not at record lows in the first five months of 2013, before abruptly spiking amid talk of the Federal Reserve ending its financial stimulus initiative.

Still, 2014’s annual rate can be considered much better than what most experts had forecasted, as analysts had generally foreseen 30-year fixed mortgage rates to be closer to 5 percent by the end of 2014.

On a similar note, Bankrate also reported this week that mortgage rates added a few basis points, as 30-year FRMs moved up from 3.96 percent last week to 3.99 percent as of the most recent report. 15-year FRMs, which were at 3.25 percent last week, edged up by two basis points to 3.27 percent. 5/1 ARMs, previously at 3.28 percent, rose four basis points to 3.32 percent.

“Despite forecasts for increases in 2014, mortgage rates fell throughout the year, with the benchmark 30-year fixed mortgage rate ending 2014 under the 4 percent threshold, at 3.99 percent,” said Bankrate. “Even with average home price appreciation of 5 percent, housing is more affordable now, with lower monthly payments on a larger loan than one year ago, by virtue of lower mortgage rates.” It is worth noting that the home price appreciation mentioned by Bankrate is much slower than the price increases recorded in calendar year 2013.

Even then, Bankrate also observed that the housing market in general remains “sluggish” as a lack of income growth remains a headwind for potential buyers. “If wage growth materializes as expected in 2015, home sales will pick up as buyers’ reluctance slips away”, said Bankrate in conclusion.