Why Mortgage Rates Are Not Increasing

Most experts predicted that mortgage rates will rise in 2014.  However for the past month, rates have not really moved.  If anything, they've moved slightly lower. What happened? Was the prediction inaccurate?  

Guy Cecala, Inside Mortgage Finance editor-in-chief said, "The simple answer is that the rate hike due to the Fed's tapering really took effect last May/June - despite the fact that the tapering didn't begin until December."  The mortgage rate jump up at the start of last summer. 

Based from Mortgage Bankers Association weekly report, total number of mortgage applications are down 52% from a year ago, while refinance applications and purchase applications are down nearly 63% and over 12% respectively. 

Federal Reserves has cut its mortgage-bond purchases by $5 billion in January but it has had no effect on rates for one simple reason - according to the publisher of TheMortgageReports.com, the reason why Fed's tapering had no effect on rates is because investors are filling the void. When stock market falls, investors put their money elsewhere such as bonds. When the Feds are cutting its purchase of bonds, other investors have stepped in to fill the void. 

So, is the prediction going to come true this 2014? Experts say, probably yes, but not because of Fed's moves or more mortgage regulation. As a general rule, mortgage rates tend to increase with an improving economy and a strong stock market - and that it is beginning to look like where we are headed!!  If you, or anyone you know, is interested in buying, selling, or learning more about real estate please contact us.  We specialize in Alaska Real Estate and also have amazing Realtors we refer in other housing markets Nationwide!! Call us today and we would happy to help!!