By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.

Mortgage rates took a tumble this past week, so far proving that 2014 is not guaranteed to be the year that rising interest rates are a sure bet.

According to Freddie Mac, rates on the 30-year fixed-rate mortgage averaged 4.41%, down from 4.51% the previous week. And average rates on the 15-year fixed rate mortgage fell to 3.45% from 3.56% the previous week.

The mortgage finance company cited signs of a softening economy as the main trigger for falling rates.

 

While mortgage rates aren’t the only factor that triggers movement in the housing market, it’s important to watch them as they can and do impact individual circumstances.

For instance, a drop in rates sometimes will trigger more demand as buyers rush to take advantage – especially when we’ve been warned that rates would rise.

For markets experiencing constrained supply and multiple bid situations, this decrease in rates could keep the competition pretty cutthroat for the weeks ahead. So for buyers in competitive markets out there, this wouldn’t be a sign that things will get easier – although it is a sign that borrowing has just become a bit cheaper.

Falling or rising interest rates can each act as a spark to move buyers off the sidelines. A drop in rates can in some cases shave several thousand dollars off the total cost of a home.  And the anticipation of rising rates can spark buyers too.

On the flip side, a rise in rates can also price out certain folks from the market.

Rates have climbed substantially over the past year, but averages have remained below 5%. We’re likely to see that continue through the year as long as the economic recovery remains slow. But that’s sort of a catch-22 for housing. We need a strong economy to fuel growth and home sales. With that strong economy, we’re likely to see increases in rates as we saw in 2013.

It should be an interesting year in the mortgage market. The Federal Reserve, which overseas movements in rates, is gearing up for an executive changeover as Chairman Ben Bernanke steps down. We’re bound to see some change in policy as a new head moves in.

Stay tuned!

 

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