Forecasts for Higher Mortgage Rates Were WrongMortgage rates continue their downward spiral into 2015, defying predictions of higher rates. Mortgage rates moving lower in 2014 wasn't supposed to happen. Experts in the industry, including the Mortgage Bankers Association (MBA), forecast mortgage rates to be much higher than current levels. In March of 2014, the MBA's Mortgage Finance Forecast had 30 year mortgage rates hitting 5.00 percent by the fourth quarter of 2015 and 5.10 percent in the first quarter of 2015. Current 30 year mortgage rates are averaging 3.80 percent and the lowest 30 year rates quoted today are at 3.50 percent. The most recent MBA forecast for rates is their December Mortgage Finance Report. Forecasts were for 30 year rates to be at 4.40 percent in the first quarter of 2015 and hit 5.00 percent in the third quarter. These forecasts will probably have to be revised down again since rates have moved lower since December. Lender
APR / Rate
Fees / Points
Payment
$5,000
Includes 0.750 points for $3,000
Lender Fees: $2,000
$3,216 /mo
$7,500
Includes 0.875 points for $3,500
Lender Fees: $4,000
$3,216 /mo
$3,544
Includes 0.711 points for $2,844
Lender Fees: $700
$3,295 /mo
$5,500
Includes 0.875 points for $3,500
Lender Fees: $2,000
$2,399 /mo
$4,000
Includes 1.000 points for $4,000
Lender Fees: $0
$3,430 /mo
$4,168
Includes 0.867 points for $3,468
Lender Fees: $700
$2,526 /mo
$5,495
Includes 0.875 points for $3,500
Lender Fees: $1,995
$2,562 /mo
$5,780
Includes 0.945 points for $3,780
Lender Fees: $2,000
$2,562 /mo
Rate data provided by RateUpdate.com. Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes and insurance premiums. Actual payments will be greater with taxes and insurance included. Rate and product details.
Lenders peg mortgage rates to 10 year bond yields and 10 year yields are almost at record lows. 10 year yields closed on Friday at 1.81 percent, only 14 basis points from the record low of 1.66 percent set in May 2013. You can view the history of bond yields on the U.S. Department of the U.S. Treasury website: U.S. Treasury Yields. Forecasts on mortgage rates have been wrong because forecasts on bond yields have been wrong. When the Federal Reserve started winding down their purchases of long term bonds and mortgage backed securities, interest rates were supposed to move higher. The Federal Reserve stopped their purchases in October 2014 and since that time bond yields have fallen considerably. At the end of October, 10 year bond yields closed at 2.35 percent, 54 basis points higher than the current rate. That is almost a 23 percent drop. Average 30 year mortgage rates have fallen from 3.98 percent to 3.80 percent, 18 basis points or almost a 5 percent drop. Average mortgage rates haven't dropped as much as bond yields because lenders have been slow to lower rates. This would suggest 30 year rates on average could fall even further, regardless of whether or not bond yields fall further. Once the Federal Reserve increases rates, banks and other financial institutions will as well. Mortgage rates, other loan rates, CD rates and other deposit rates will all move higher. Explore Other Mortgage and Refinance Offers
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