Editor’s note: This article is a “living document” that will be edited and updated as new mortgage-rate forecasts and data become available over the coming months.
I know what you’re thinking. It’s only September, and already we’re offering mortgage predictions and projections for 2015. But it’s never too early to start projecting. In fact, statistics show that most mortgage shoppers start researching the market months before they actually close on a loan. So with that kind of advanced research in mind, we have rounded up some 2015 mortgage rate projections and forecasts from a variety of expert sources.
Here are the predictions at a glance:
- Freddie Mac expects the average rate for a 30-year fixed mortgage to reach 5% by the end of 2015.
- The Mortgage Bankers Association also expects to see 5% averages by the end of next year.
- Lawrence Yun, chief economist for the National Association of Realtors, forecasts a gradually rising trend “with the 30-year fixed rate averaging … 5.5 percent in 2015.”
- Economist Dr. Bill Conerly expects the 30-year average to climb even higher next year, perhaps reaching 6% by year’s end.
- The Home Buying Institute’s projections are on the lower side, matching the 5% outlook offered by Freddie Mac and MBA.
2015 Mortgage Rate Predictions from Freddie Mac, MBA
Freddie Mac, the government-controlled mega company that buys and sells mortgage-backed securities, runs a weekly survey of the lending industry that dates back to 1971. According to their survey archives, 30-year home loan rates dropped from 4.53% at the beginning of this year to 4.10% by September 1, 2014 (when this article was published). But their 2015 forecast for 30-year fixed mortgage rates calls for a gradual rise, as shown in the table below. As a result, home buyers and refinancing homeowners could encounter higher interest charges in 2015 compared to this year.
Notes: The table above shows Freddie Mac’s rate forecast for 2015. It is based on their economists’ analysis of current trends within the housing market, the lending industry, and the broader economy. According to a company press release, “we expect to see rates rise as the economy strengthens. At the end of 2015, we expect to see the 30-year fixed mortgage around five percent.” That would be a gradual increase over the coming months, as seen in the projection table above.
The Mortgage Bankers Association (MBA) also provides long-term outlooks and forecasts in this area. And their chart looks nearly identical to the one shown above. They also expect the average to rise to 5% through the end of next year.
Dr. Bill Conerly, economist and senior fellow at the National Center for Policy Analysis, expects the 30-year average to rise even higher next year. In an article for Forbes magazine, Conerly wrote: “Long-term mortgage rates get up to around six percent by the end of 2015, but that’s not deadly to the economy. The interest changes are … the result of stronger economic growth.”
Home Buying Institute’s Forecast for 30-Year Mortgage
Here at HBI, we expect rates to rise only gradually between now and the end of 2015. Some of the more dramatic predictions for next year have been linked to the Federal Reserve, and the fact that they are winding down their Quantitative Easing (QE) economic stimulus program. But we feel this will have only a minimal impact on mortgage rates, going forward.
In the past, many economists and analysts predicted a sharper rise in long-term interest rates, as the Federal Reserve began to scale back its bond-buying stimulus program. But the Fed started reducing their bond purchases months ago, and it did not have the predicted effect.
In fact, the benchmark 30-year mortgage rate actually dropped in the months following the Fed’s initial scale-down in stimulus. The 30-year average was 43 basis points (0.43%) lower at the end of 2014 than at the beginning of that year, when the stimulus was going strong. So we do not expect any sharp upturns in the near future, despite the ongoing reduction in stimulus.
The Fed is expected to continue winding down its stimulus program, and ultimately end it some time in 2015. Based on what we’ve seen this year, we expect their policy shift to have only a negligible impact on long-term interest rates next year. Thus, our 2015 mortgage rate prediction / projection mirrors the (lower) one offered by Freddie Mac and MBA, as opposed to the higher estimates offered by other analysts.
Additionally, the U.S. economy is growing at a very modest pace right now. Long-term interest rates tend to rise during periods of significant economic improvement (i.e., when things are going really well). But our economy still shows signs of weakness and sluggishness. So it probably won’t have much of a lifting effect on mortgage rates as we head into 2015.
Bottom line: Home buyers and homeowners who are in the market for a mortgage loan next year probably have little to worry about, as far as rising rates go. They will likely rise through the end of 2015, but only gradually.
Beating the Averages for a Better Deal
The 2015 mortgage rate forecasts above are based on industry-wide averages and trends. For instance, Freddie Mac’s weekly survey of the lending industry is based on average rates reported by 125 survey respondents (lenders) from across the U.S. But mortgage pricing is highly individualized:
- A borrower who is considered to be well qualified could secure a below-average interest rate. These are people with excellent credit, steady income, and low debt levels in relation to their total household income.
- On the contrary, a marginally qualified borrower (lower credit score, higher debt ratio, etc.) would likely pay more in interest.
A borrower could potentially land a better rate by achieving a higher credit score, putting more money down, or even paying points at closing. The type of home loan being used also plays a role.
Here are some tips for negotiating a lower mortgage rate.
Disclaimer: This story contains forward-looking statements relating to the housing market, lending industry, and broader economy. Interest rate projections are based on trends that can change over time. As a result, they may prove to be inaccurate over the long term. The 2015 mortgage predictions and forecasts presented are the equivalent of an educated guess. They should not be viewed as facts or certainties. We make no guarantees about future trends or conditions within the housing or mortgage industry.