2013 is the year of bargain mortgage rates. Will 2014 signal the end its end?

 

The National Association of Realtors and the Mortgage Bankers Association has projected mortgage rates to jump to 5.3% in the last quarter of 2014. Analysts from Fannie Mae and Freddie Mac are more optimistic predicting rates of up to 5% next year.  

 

The anticipated jump in rates for 30-year, fixed-rate mortgages is due to the anticipation that the Federal Reserve’ will start to raise rates in 2014 and the anticipated reduction of its $85 billion-a-month bond purchasing program aimed at keeping rates low to stimulate economic growth.

 

Higher rates will result in more than 50% decrease in mortgage refinancing but home purchase loans are expected to rise due to increase in home sales and home prices. Still, even with higher mortgage rates, affordability is expected to remain strong in most markets, with high-price areas serving as the only exception.

 

"I would love interests rates to stay below 4% but we all knew rates would increase at some point. With interest rates increasing this should slow demand a little bit. Hopefully this will create a more manageable real estate market," Barry Kunselman, a realtor in Central Denver states.  "If you were in the market to purchase a home last year or knew someone who was I'm sure you heard how difficult it was to find a good home before it went under contract.  If the market slows down hopefully this will give buyers more time to find the perfect house without the fear of getting into another bidding war," Barry shares.

 

Predicting exact outcomes for the market is impossible. Uncertain Fed policy and government negotiations over the budget and debt ceiling could disrupt economic activity in the first part of the year.