Mortgage Rates Defy Predictions With Four-Week Downward Trend

Earlier this year, several analysts within the lending industry predicted a gradual rise in 30-year mortgage rates through the end of 2013. The Mortgage Bankers Association (MBA) is one of several groups that made such a prediction. Their most recent forecast, published on April 18, 2013, was actually revised upward from previous forecasts.

The MBA’s current outlook calls for a steady rise in mortgage rates through the fourth quarter of 2013. According to the most recent MBA forecast, the 30-year fixed-rate mortgage could average 4.1% by the end of the year. That would be about 0.6% higher than the current average.

Looking further ahead, they expect the benchmark rate to hover in the 4.5% for most of 2014.

Mortgage Rate Movement, Year to Date

Mortgage rate trends for January and February supported these “gradual rise” predictions. At the start of this year, 30-year home loans were averaging 3.34%. This is according to the weekly market survey conducted by Freddie Mac.

The benchmark rate inched its way up to 3.53% by the end of January, and hovered in that range for the next three weeks. Then it jumped up to 3.56% on February 21, 2013. After a bit of fluctuation, 30-year mortgage rates rose again to 3.63% in mid-March.

But here is where things get interesting. Since March 28, 2013, the benchmark mortgage rate has been on a downward slide. It fell from 3.57% to 3.41% over a four-week period. That’s four consecutive weeks of declines. So in a way, recent trends defy the earlier predictions.

That brings us to the million-dollar question: Will mortgage rates sink lower over the coming weeks? Or is the recent four-week downward trend a mere fluctuation along the path to higher rates? We will find out soon enough. Freddie Mac’s next survey will be published on Thursday, April 25, 2013.

Monthly Payment Perspective

Home buyers planning a purchase, and homeowners planning to refinance, are typically concerned about mortgage rates. And rightfully so. The interest rate is one of the variables that determines the size of your monthly payments. But we need to keep them in their proper perspective.

The 30-year benchmark rate has hovered around 3.5% for much of this year. Some analysts have predicted it will rise to the upper 3% range, or even 4%, by the end of 2013. So let’s assume you wait a few months to lock down your mortgage rate. How much would it cost you at the monthly level?

  • A $250,000 loan with a 30-year term and an interest rate of 3.5% will have a monthly mortgage payment of around $1,122. This excludes property taxes and homeowners insurance, for the sake of simplicity.
  • That same mortgage loan with an interest rate of 3.7% would have a monthly payment of around $1,150.

In this scenario, we’re looking at a difference of around $28 per month. Not a budget-buster by any means.

Borrowers should also realize the interest rate assigned to their loans will depend on their individual qualifications. All of the numbers listed above are averages. The actual mortgage rate assigned to your loan will depend on such factors as your credit score, the amount of debt you have, the size of your down payment, and other factors. So don’t sweat the averages. Keep it all in perspective.

Disclaimer: This story contains forecasts and predictions provided by third-party sources. We make no claims or guarantees about the validity or accuracy of those predictions.