2015 Mortgage Rate Forecast: Fasten Your Seat Belts!

Whether you plan on buying or selling a home in the coming year, insight from an expert on where mortgage rates are heading can help you prepare for success in 2015. Gina Pogol, Senior Marketing Manager for LendingTree forecasts what the New Year has in store for the mortgage industry.

Predicting mortgage rates is a challenge in both the short term and the long term. In fact, mortgage rates change continually, just like the prices of stocks and bonds, all day long. Like stocks, they can be affected in a heartbeat by events far away, like a developing conflict in Ukraine or an earthquake in China.

As daunting as the exercise is, however, investors and companies do try to predict mortgage rates, and here are some forecasts from the most prominent experts.

Fannie Mae Lowers Rate Forecast
Mortgage clearinghouse Fannie Mae, one of the biggest players in the mortgage market, recently reduced its 2015 mortgage rate forecast. The financing giant’s latest housing-market analysis put the 2015 rate for the 30-year fixed-rate mortgage at about 4.3% — a drop of .2 percent from Fannie’s previous prediction for the rate in 2015.

“The housing market continues to grind its way upward, but we don’t expect a breakout performance in 2015 as the fundamentals remain somewhat muted,” explained chief economist Doug Duncan. “We believe that mortgage activity in 2015 will be very similar to 2014.”

If Fannie Mae is right, there would appear to be less urgency for those considering a home purchase or refinance.

Mortgage Bankers Association Expects an Increase
On the other hand, the Mortgage Bankers Association recently released its own forecast, which shows mortgage rates hitting five percent in 2015. If they are right, nailing down a lower interest rate today would look like a very smart move tomorrow.

Why would the MBA differ so sharply from Fannie Mae? They have essentially the same information, but they could be interpreting it differently.

Freddie Mac Weighs In
Freddie Mac, the “other” mortgage major mortgage buyer in the US, disagrees with big sister Fannie Mae, asserting that it expects rates to hit five percent in 2015. Freddie Mac has been tracking mortgage rates since 1971 with its Primary Mortgage Market Survey.

No Crystal Ball for 2015
One major factor that’s been keeping mortgage rates low for American citizens is the fact that US Treasuries are widely considered “safe havens” by investors around the world. When economic or political instability threatens, investors are less concerned with the return on their investments than they are with keeping their money safe. When that happens, they buy US Treasuries, which pushes bond prices up and interest rates down.

In addition, in some parts of the world, deflation is a real concern — the European Central Bank, for example, began paying negative interest this year — effectively charging investors to leave their money in its care. For those investors, even a tiny return is better than nothing, and once again, US bonds become popular.

For these reasons, predicting mortgage rates in 2015 is similar to predicting what ISIS will do, or what Putin will do, or what economic leaders in Greece, Germany or Italy will do.

However, the one thing that almost no one is predicting is that mortgage rates will go down.

Looking to buy a home? Get the most up to date mortgage rates in your area and compare offers to find the right rates for you.