Mortgage Rate Forecast for 2014: Predictions from Freddie Mac, MBA and More

By Brandon Cornett | December 2, 2013 | © 2014, all rights reserved | Duplication prohibited

Find out how much you can afford to borrow:

It’s December, and that means many mortgage shoppers are looking ahead to 2014, with an eye on mortgage rates. So we thought it would be helpful to create a collection of mortgage rate predictions and forecasts for 2014, from a variety of expert sources.

Looking for current rates on home loans? You’ll find those here.

We’ll get to the predictions in a moment. But first, let’s take a look back at what mortgage rates have done over the past 12 months.

Looking Back: Rate Trends of 2013

We can gain some insight into the mortgage trends of 2014 by looking back over the current year’s trends.

Rate chart, through Nov 2013

2013 mortgage rate trends. Click to enlarge.

The chart at right shows interest rate movement from the end of November 2012 through the same period of 2013. This chart is based on the industry-wide averages reported by Freddie Mac each week.

The first thing you’ll notice is the upward surge that started around May 1, 2013 (shown as 5/1 on the bottom axis of the chart). That was when the average rate for a 30-year mortgage rose by 116 basis points, or 1.16%, over a ten-week period.

What caused the spike? In a word, the Fed. Around that time, the Federal Reserve began hinting at a possible wind-down of their “quantitative easing” stimulus program. This led to a rise in long-term interest rates as investor demand shifted.

Read: New mortgage rules coming in 2014

What does this have to do with mortgage rate predictions and forecasts in 2014? Everything. Regardless of the source, most of the rate forecasts for 2014 have one thing in common. They all cite the likelihood of the Federal Reserve’s reduction in stimulus as the underlying cause for rising interest rates over the next year. You’ll see this in the next section of our forecast summary.

Going Forward: Mortgage Rate Predictions for 2014

The Mortgage Bankers Association (MBA) publishes a monthly forecast that includes quarterly predictions for housing starts, home sales, and 30-year mortgage interest rates. According to their latest report, MBA expects to see the following 30-year rate averages in 2014:

  • First quarter: 4.7%
  • Second quarter: 4.8%
  • Third quarter: 5.0%
  • Fourth quarter: 5.1%

Based on this prediction, mortgage rates could rise steadily in 2014, clearing the 5% threshold before the end of the year. This is why industry analysts are predicting a significant drop-off in refinancing activity next year.

MBA also expects the 10-year Treasury bond rate to rise rapidly toward the second half of 2014. Generally speaking, the benchmark 30-year mortgage rate follows the up-and-down movements of the 10-year constant maturity Treasury bond. So MBA’s forecast for the T-bond could also be viewed as a prediction for rising home-loan interest rates in 2014.

According to the industry group’s latest forecast commentary: “[30-year] mortgage rates will hit the 5 percent level in 2014, averaging 4.9 percent for the year, and increase further to 5.2 percent for all of 2015.”

Read: 8 real estate trends for next year

MBA also anticipates that the Federal Reserve will taper, and eventually cease, their stimulus efforts next year. “We had expected the Fed to begin tapering its asset purchases in early 2014, and ending QE3 in September 2014,” the group stated, adding that “an earlier start date for the tapering is not out of the question.”

Freddie Mac has also issued a forecast for rising interest rates through the end of next year. Freddie Mac, the government-controlled corporation that buys home loans and sells them to investors, publishes a housing and economic outlook each month. Their prediction for mortgage rates in 2014 calls for “the 30-year fixed mortgage ending the year near 5 percent with [housing] affordability still strong in most markets.” … story continued below.

Disclaimer: This story contains predictions and forecasts made by third-party sources. Such forward-looking statements are the sole opinions of the authors and do not necessarily reflect the views of the publisher. We make no claims or guarantees about mortgage rate trends in 2014, or housing and economic conditions in general.