Mortgage Rates Remain Historically Affordable, Will Increase Throughout 2014

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historic mortgage rates by decadeAlthough mortgage rates for the 30-year Fixed Rate Mortgage (FRM) continue to climb, historical perspective shows that rates are still relatively low. Home buying in 2014 will remain more affordable than in past decades, but rates will continue to grow throughout the year and into 2015. This chart shows average mortgage rates from each past decade based on a $200,000 30-year FRM. Mortgage payments were highest in the 1980s, where mortgage payments were 217% higher than we are seeing currently. At these levels, mortgage rates should not be a significant deterrent to home affordability or home buying levels. Although it seems high compared to last year’s rates around 3%, current rates are still historically low.
mortgage rate projectionsOver the next two years, however, experts predict mortgage rates will steadily increase throughout this year and into the fourth quarter of 2015. Freddie Mac, Fannie Mae and the Mortgage Bankers Association released their projected rates for fourth quarter 2015, represented above, all at or above 5%. Freddie Mac recently released a statement, “We are not likely to see average 30-year fixed mortgage rates return to historic lows experienced in 2012.” While some buyers might be waiting for the lows of 2012 and 2013, they are unlikely to return, and the most affordable rates buyers can find are available today. Over the next 18 months, rates will continue to climb, so homes are most affordable during this buying season. If you’re thinking about waiting — don’t! Now is the time to capitalize on the lowest mortgage interest rates possible.

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