When compiling rate predictions for 2014, it was almost unanimous that mortgage rates would be around 5% at the end of the year, however as we all know, rates ended up at an average of 3.87% instead (according to Freddie Mac). Here are a few factors that have contributed to the historically low interest rates we have been experiencing, and insight to what we can expect in 2015.
• WEAKENING GLOBAL ECONOMIES – China and Europe have seen progressively weaker economies throughout 2014. This shift is prompting investors to seek “safe” investments which bring them to invest their money within the U.S.
• CONFLICT, WAR & ILLNESS – Our society is heavily swayed by the media. Every night on the news, we see political unrest overseas, growing concerns about the Ebola virus and much more! As investors see this, it causes them to lean towards safer investments in the uncertainty of societal outcomes.
• LOW INFLATION RATES – Inflation rates in 2014 did not increase as they were expected to. Inflation is the enemy of low mortgage rates, which shows why the absence of inflation in 2014 was good for low mortgage rates.
In 2015, some industry leaders are predicting that rates will rise to 5%, while others think rates have the potential to stay low. As the U.S. economy continues to grow, the Federal Reserve will raise short-term rates, and longer-term rates (including mortgage rates) will increase as a result.
The prospect of higher rates this year has many lenders urging would-be home buyers to act soon! Interest rates on mortgages are extremely low right now and it is uncertain what we can expect as we go forward in 2015. Contact us today to learn about your loan options!