Every 6 months on my blog I put out an interest rate prediction. In November I predicted rates to remain close to where they currently are now. How was my prediction? In November of 2013 the average rate from Freddie Mac’s weekly survey on a 30 year fixed rate was 4.16% paying .8 points. Last week Freddie Mac’s survey showed rates at 4.12% paying .6 points. Basically, that’s the same rate. So, pretty good prediction, thank you very much!
So where will rates be at the end of the year? I believe rates are going to fall. Why? Below are all my reasons:
1) The Economy. The economy is not getting stronger and I don’t believe it will get better the rest of the year. It’s June and the pundits are still blaming everything on the weather. Enough already.
2) Housing. Housing is slow. Take out all the Wall Street cash buyers and the numbers are just not good. Too many people are under water, there are not enough first time home buyers, and wages are not increasing while home prices continue to increase. Something has to give. One thing that will help is lower rates. Another would be a low down payment mortgage for first time home buyers. I’m predicting both will happen.
3) Decreasing Mortgage Production. Mortgage production is at a 17 year low and by the end of the year it might be at a 25 year low. Low mortgage production is bad all around. It’s bad for most major bank’s bottom lines. It’s bad for all the lay-offs in the mortgage industry. It’s bad because less people refinance meaning less money goes into the economy. And it’s bad because it means there are less purchases which effects numerous areas of the economy in a negative way.
Put all these factors together and rates have to fall. I predict June and July economic numbers to remain weak. Blaming bad winter weather will no longer be an option.