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Politics & MoneyMortgage

Here’s why mortgage rates won’t hit 2014 expectations

Originally estimated to reach 5%

Mortgage rates have continuously defied expectations in 2014, according to an article in the Washington Post

Back at the end of 2013, the market was trying to predict where rates would go in 2014, with most experts predicting rates to steadily increase.   

Frank Nothaft, chief economist with Freddie Mac, predicted that by the end of 2014, mortgage rates would approach and perhaps touch 5%, mostly due to the Federal Reserve’s quantitative easing.

This looks more and more unlikely.

Looking at the most recent Freddie Mac Primary Mortgage Market Survey, the 30-year, fixed-rate mortgage averaged 4.12%, compared to 4.10% a week prior and 4.57% a year ago this time.

Interestingly enough, Len Kiefer, Freddie’s deputy chief economist, noted that rates on a 30-year, fixed mortgage have not moved more than a tenth of a percentage point on a week to week basis all year — a first since 1977, and there’s no reason to expect they will move much as the year winds down.

The reason according to the Washington Post: The U.S. economy’s lackluster growth and political tensions around the world.

“When the economy is doing better, people take more risks and demand more homes, which pushes up mortgage rates,” said Kiefer of Freddie Mac. “When the economy is not growing, it keeps interest rates down.”

But optimism about the economy faded this year after a brutal first quarter, when the economy contracted. The bad economic news helped keep rates low for the first half of the year, and international events are expected to keep them down through December.

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