Experts believe that with national economic growth projected at 3.3% this year and unemployment figures expected to fall, we should also expect to see a mortgage rate increase during 2015.
After the financial market crash, we have had 6 years of record low mortgage rates. For years now, the financial world has been abuzz with speculation of how long these low rates will last. Despite the debate, most experts agree that rates will begin to go up in 2015. How much rates are expected to rise is where the experts are divided.
Current rates for a 30-year fixed are hovering just below 4%. Some expect to see that figure rise to around 4.75% by the close of 2015, while others estimate that they will rise as high as 5%.
What will an increase mean to end consumers? On a $500,000 mortgage, a rate increase from 4% to 4.75% would increase the borrower’s potential monthly mortgage payment by $221.
Although rates are expected to increase, lets keep things in historical perspective. Rates were around 6% leading up to the recession and have averaged just over 8.5% since Freddie Mac began tracking them in 1971. So even with the expected increase, 5% is still very low.
This modest rate increase isn’t expected to have a significant impact on buyers’ demand. This is good news for sellers because we can expect to see housing inventory increase this year as well, since most areas of Seattle have recovered or surpassed their pre-recession values. Although buyer demand remains high, buyers can expect 2015 to have fewer multiple-offer frenzies than the past two years, bringing some formerly discouraged buyers back in the hunt.
No matter who you are, 2015’s projections are positive. Buyers can take advantage of continuing low rates and sellers can expect the competitive market to result in short market times and strong offers from prospective purchasers.