Mortgage Rate Recap for January 2015

The mortgage rate market is poised to end the first month of 2015 in strong fashion and continue its recent run of stellar and historically low interest rates.

Buoyed by on-going and seemingly unending issues that continue to plague the Eurozone, mortgage rates reached the lowest levels they have seen since May 2013 in January.

Freddie Mac, who has tracked average mortgage interest rates for over 40 years, said Thursday the national average for a 30-year mortgage edged up to 3.66 percent from 3.63 percent last week. A year ago, the average 30-year mortgage stood at 4.32 percent and the 15-year at 3.40 percent.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as discount points, which are used by mortgage borrowers to “prepay interest” in order to obtain a lower interest rate. One point equals 1 percent of the loan amount. but its effect on rate will vary from lender to lender.

The average discount points for a 30-year mortgage were 0.6 points, down from 0.7 points last week. The fee for a 15-year mortgage fell to 0.5 points from 0.6. You can check out the Freddie Mac mortgage rate survey results from January 2015, all the way back to 1973 on their website. Factors both domestic and abroad are, in combination, driving the continuance of our historically low rates.

The newsmaker out of the European Union is Greece, again.
The Greeks held elections this week and the winner ran on a platform promising to roll back austerity measures championed by German Chancellor Angela Merkel after the EU bailed Greece out in 2013. If Greece were to walk away from the austerity measures, they would in all likelihood have to walk away from their membership in the European Union as well. They would likely default on their debt as well.

It’s impossible to know when Europe will turn a corner, and even then it’s only the sort of thing we’ll be able to observe in hindsight.

In domestic news, the Federal Reserve held their first FOMC gathering of 2015 this week. They did little to move the markets in any significant way, but they did provide some solid insight on what we should expect going forward. One of the biggest takeaways from their meeting came when they signaled that it might be some time before they began hiking the Fed Funds Rate which has rested at .25% since December 2008. The Federal Reserve’s statement includes verbiage from Chairman Yellen that, “it can be patient” as it decides when to begin raising rates.

In December Yellen said that “being patient” meant the central bank would probably wait two meetings, or about six months, before taking action. That jives with what the talking heads predicted toward the end of 2014. Even when the Fed does start raising rates, the increases will be slow and methodical according to their own words. Stating “economic conditions may, for some time” result in interest rates “below levels the Committee views as normal in the longer run.”

The FED also cited low inflation as one of the key factors in allowing them to continue their current monetary policy. They expanded that inflation is  “anticipated to decline further in the near term,” but they expected gradual increases in the “medium term.” The inflation factor is an offshoot of the recent collapse of oil prices and their effect on the economy. With all indications pointing to an extended period of affordable oil, it would not surprise me if the Fed held steady on rates until the October 2015 meeting.

The continuance of fantastic mortgage rates should make the 2015 Spring buying season robust as home-buyers look to capitalize on the unprecedented mortgage rate rally that we have been seeing for the last 6+ months.