As 2014 closed, oil prices cratered, quantitative easing finally went away, and the Federal Reserve is likely to start raising rates, according to Bankrate.com.
“The Federal Reserve is likely to boost its short-term interest rate target around the middle of next year if economic growth continues to be solid as the Fed – and we – currently expect," predicts Lynn Reaser, chief economist for Point Loma Nazarene University in San Diego.
Reaser thinks the Fed will move gradually, increasing the rate to around 1% by mid-year.
"Bond yields and mortgage rates will begin moving higher as the timetable for Fed interest rate hikes comes into focus, with rates on credit cards, auto loans and home equity lines of credit responding after the fact," says Greg McBride, CFA, Bankrate's chief financial analyst. "The bulk of next year's increases will come in the back half of the year."
McBride expects the 30-year fixed-rate mortgage to stay below 5% in 2015, but it could experience some volatility.
"We'll see rates near 4% on the low side if there's an economic stumble or geopolitical crisis, and rates as high as 4.8 or 4.9% if the Fed missteps or misspeaks," McBride says.
National Association of Realtors chief economist Lawrence Yun said he expects the Fed to act sooner, raising its short-term rate in the first half of 2015, due to inflationary pressures of rising wages and rents, while Realtor.com chief economist Jonathan Smoke expects 5% sometime in 2015.
The Mortgage Bankers Association has said it expects the Fed to wait until after mid-year before any action.
Homeowners might see higher rates for home equity loans if the Fed nudges short-term rates up in 2015.
"But even then, we're talking about very measured increases and an environment of strong lender competition. That works in favor of home equity borrowers," McBride says.