With mortgage rates in San Diego averaging their lowest in 20 months, there are many people recognizing the opportunity to get a mortgage in order to purchase a home. However, despite the low mortgage rates seen at the start of 2015, many experts predict that rates will start to increase steadily and that they will probably reach the top 4 percent or even 5 percent by the start of next year.
Mortgage rates in 2014
For most of 2014, mortgage rates have been steadily falling. At the start of 2014, rates on 30 year fixed rate mortgages were averaging 4.50 percent, while at the end of the year, rates were averaging 3.75 percent. This is an improvement of 0.75 points, which is quite a great deal considering how much money San Diego home owners managed to save in 2014 due to the falling of mortgage rates. The significant drop of mortgage rates in 2014 marked a second best annual improvement. The thing is that most experts actually predicted that mortgage rates will increase in 2014, and few expected rates to fall and by this much.
2015 mortgage rates
This year, mortgage rates are still declining, and rates on 30 year fixed rate mortgages have reached their 20-month low at 3.73 percent. While Wall Street and 96% percent consumers believe that mortgage rates have bottomed and that they will start to increase, experts have mixed predictions regarding mortgage rates at the end of the year.
Some experts believe that the mortgage rates will move lower throughout the year, motivating the weak economies of several countries abroad such as Japan, Russia or China. They also believe that many investments will be driven towards the US and that the country will benefit from an increasing mortgage-backed securities market. As prices for MBS will improve, mortgage rates will drop these experts say.
The most likely course for mortgage rates in 2015
Despite the above optimistic prediction, most experts, including those from Freddie Mac and Fannie Mae agree that mortgage rates will start to increase sometime this year and that they will continue increasing by 2016. The Mortgage Bankers’ Association has predicted that mortgage rates will rise to 5 percent this year, while the chief economist from Freddie Mac, Frank Nothaft predicts that mortgage rates will average somewhat lower than what MBA predicted at 4.5 percent.
The Fed has also signaled that the third round of quantitative easing (or QE3) since the recession has ended, and MBA also believes that a short term fund hike is possible to come by the middle of 2015, resulting in mortgage rates starting to increase.
However, it is also worth mentioning that many experts thought that mortgage rates will climb up to 5 percent by the end of 2014, while in reality, they were either declining or staying flat. Nothing is certain nowadays except for the fact that mortgage rates are now at their 20-month lowest, so instead of waiting and risking to pay higher mortgage rates in the following months of 2015, it would be better to take advantage of the current low rates.