Interest Rate Update: Are the Rates Going to Remain Steady?
June 5, 2014
If you haven’t heard much about interest rates lately, you’re not alone. Interest rates haven’t been front-page news lately because they’ve remained fairly steady since the beginning of the year.
But why? And will this trend continue or will the rates fluctuate in the coming months?
To see if we can get a better understanding of the rates, let’s look at the interest rate trends over the past year and a half, as reported by Freddie Mac’s Mortgage Rates Survey. Following record-low rates at the end of 2012, the rates on a 30-year fixed-rate mortgage slowly climbed in the first half of 2013 before jumping above the 4.0 percent mark in June and remaining in the 4.2-4.5 percent range for most of the second half of 2013. This year, the rates have fluctuated even less, with a variance of about one-quarter of one percent (4.12-4.39) since the third week of January. If there’s been a trend lately, it’s been a trend of steadiness.
Although mortgage rates are influenced by a variety of factors—including bond yields, domestic and global markets and general economic conditions—one of the biggest reasons for the lack of fluctuation in the rates may be because the Federal Reserve has kept the federal fund rate low. The Fed lowers the federal funds rate in order to stimulate the economy or raises it with the aim of heading off inflation and, generally, mortgage interest rates tend to follow. Lately, the Fed has kept the federal fund rate near zero because of “slack remaining in the economy despite lower unemployment,” according to Federal Reserve Chair Janet Yellen.
But just because the interest rates are steady now, that doesn’t mean we’ll see this trend continue, especially in the long term. Although the rates have trended slightly downward in the last few weeks, interest rates can change quickly. June and July of 2013 is a perfect example of how rates can jump almost overnight. On June 20, 2013, the Freddie Mac Mortgage Rates Survey reported a rate of 3.93 percent on a 30-year fixed-rate mortgage. Three weeks later—on July 11—that number jumped .58 percent to 4.51 percent. If the Federal Reserve decides to raise the federal fund rate or if economic/market conditions change, interest rates could quickly change as well.
Although many experts like to use the magic word “due” (as in, “the rates are low right now so they’re due to go up”), the reality is that rates are somewhat unpredictable. Despite repeating warnings of rising rates in the past three or four years, today’s interest rates are lower than they were in 2010. In the end, it’s best to act quickly and take advantage of the rates while they’re still low.
For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988. Licensed by the Commissioner of Banks - License No. MB2671