house-puzzle-300x300In this week’s mortgage market update, we’ll explore what may lie ahead for mortgage rates in 2014 as well as identify how rates are currently trending.

2014 Mortgage Rate Forecasting

Trying to develop an accurate mortgage rate forecast for an entire year is a challenge. Just as meteorologists face uncertainty in the Earth’s atmosphere and weather conditions, mortgage market analysts must face economic changes, unexpected setbacks and government policies – making it tough to make predictions too far in the future.

One thing we do know is that QE3, the third round of quantitative easing by the Federal Reserve, helped drive rates lower and keep them there.

At the December 2013 FOMC (Federal Open Market Committee) announcement, the Fed said that they would begin tapering their purchases of bonds that represented QE3. While a schedule was not announced, it was expected that the Fed would continue to reduce their purchases, eventually ending the quantitative easing period altogether. The tapering process of QE3 was the largest single factor right now in forecasting that mortgage rates will rise in 2014.

This shouldn’t come as a huge shock, as we’ve been anticipating this change for some time. However, most consumers who are not knowledgeable on how the process works may feel trepidation about locking in a home loan, as they may believe that rates are simply spiking as a fluke and hope to “wait it out” for rates to trend lower again. While nothing is ever 100 percent certain, this is unlikely to happen. Rates are still near historic lows and are likely to remain close to those lows even as they begin to rise. And, another silver lining is that home values and appreciation rates are now beginning to thrive in many markets, making homeownership worth the slight increase in interest payments.

Economic Improvements

Improved spending and lower unemployment are great, but they aren’t always good for mortgage rates. A thriving economy will likely drive inflation and increase mortgage rates. However, the increase shouldn’t be so drastic that potential home buyers are put off.

How high will rates actually go?

Considering the information above, it is likely that rates will remain in the low to mid 5% range throughout 2014. Buyers and refinancers who were able to lock in rates in the 3 percent range won’t be impressed, but 5 percent is still quite good – especially when you think back to the mid 1990s when mortgage rates were between 7 and 9 percent!

Mortgage Rates Current Forecast
Currently Trending: Neutral

Mortgage rate volatility is still pretty high, but rates are staying steady for now. If potential borrowers are eligible for a low rate, it would be wise to go ahead and lock it in now. Borrowers who are still on the fence should stay in close contact with their mortgage loan professional to remain in the loop.

Are you searching for an affordable home loan in the state of Texas? Are you ready to get your free mortgage rate quote? If so, contact Kelly Decker of The Decker Group to get started on securing your piece of the American Dream! Call (972) 591-3097 today for more information.