Mortgage Rates Head Back to Intra-Year Lows on Mortgage Rates Radar

Mortgage RatesMortgage interest rates were, just a few weeks back, threatening to head back to where they were about a year to this day. But that was not the case on this week’s Weekly Mortgage Rates Radar, a streamlined report that now covers only two types of mortgages – 30-year fixed-rate home loans, and 5/1 adjustable-rate mortgages. In the report, conforming 30-year fixed-rate mortgages slipped nine basis points from 3.89 percent to 3.80 percent, while conforming 5/1 ARMs fell seven hundredths of a percentage point from 3.10 percent to 3.03 percent.

Like most other mortgage rate prognosticators, vice president Keith Gumbinger attributed the decline in rates to recent announcements from the U.S. Federal Reserve. “At the close of last week’s meeting, the Federal Reserve made it pretty clear that it will be raising short-term interest rates this year,” said Gumbinger in a statement.

“However, Federal Open Market Committee (FOMC) members also updated their outlooks for interest rates in 2015 and beyond, and the general consensus is that rates will not move up as quickly or as far as was expected just a few months ago.”

As of December, most FOMC decision makers expected interest rates to end calendar 2015 at 1 percent or higher, but this may not be the case anymore, based on the recent Fed meeting. The Fed’s most recent outlook points to about two or three rate hikes to take place before 2016, and since these hikes may range between one-half and three-quarters of a percentage point, the overnight borrowing rate may be at about 0.625 to 0.875 percent by year-end.

“Even though the Fed hasn’t yet gotten to the point of ‘liftoff’ for interest rates, their ‘forward guidance’ about the path for rates suggests that interest rates will be lower for a longer period of time,” Gumbinger posited, talking about how mortgage consumers need not worry with regards to a Fed rate hike. “At least for now, financial markets have relaxed their expectations for the timing and pace of the Fed’s rate-raising campaign, and mortgage rates slipped backward.”

He also cautioned buyers to “lock in rather than float rates” due to the general volatility in mortgage rate gyrations in 2015 thus far.

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