Mortgage rates fall for the week of May 5, 2014

Posted by  on May 12, 2014

The late Harvard economics professor John Kenneth Galbraith once observed, "The only function of economic forecasting is to make astrology look respectable." His point was reinforced last week when widespread predictions -- reported here -- of a small rise in average rates for the most popular type of mortgage were proven wrong. Instead, those borrowing costs drifted down -- to a new low for 2014.

Mortgage rates last week: The numbers

According to HSH.com's latest Mortgage Rates Radar, a Wednesday-to-Tuesday survey, rates for conforming 30-year fixed-rate mortgages (FRMs) averaged 4.31 percent (with points of 0.15) during the week ending May 6. That's a significant drop of seven basis points (0.07 percent), and was enough to create that new low for the year. By Friday, the downward drift had continued, and that rate across the Saturday-to-Friday week was down to 4.29 percent with points of 0.14, also according to HSH.com.

Rates for conforming 15-year FRMs also fell, down five basis points to a 3.51 percent (with 0.11 points) average over that Saturday-to-Friday period. However, the cost trend for some adjustable-rate mortgages (ARMs) was sharply upward, with 30-year 1/1 ARMs averaging 2.97 percent (with 0.12 points) over the same period, up a hefty 13 basis points.

Clearly, home loan rates are currently volatile, so it's important for those seeking to borrow or refinance to keep up with both national and local trends. Our live database of current mortgage rates can help you find the best mortgage rates in your area.

Future home loan rates

So why did most of last week's trends leave so many commentators (including this one) with egg on their faces? HSH.com vice president Keith Gumbinger sees foreign factors at play: "Although the U.S. economy seems to be picking up some momentum, the effects of slower growth in China and the unstable situation in Ukraine are all contributing to the ongoing bid for Treasury debt, driving yields down and pulling mortgage rates down too."

Such foreign influences are always likely to affect rate trends, but the impact of domestic factors is at least as important. And these (most notably the Federal Reserve policy changes) seem set to drive up mortgage borrowing costs sooner rather than later. Indeed, the latest forecasts from Mortgage Bankers Association economists, published April 8, predict rates for 30-year FRMs averaging 5.0 percent during the last quarter of this year, and 5.3 percent during the last half of 2015.

Of course, you may take J.K. Galbraith's view of such forecasts. But if you believe today is the time to lock in -- for years or decades -- the borrowing costs for your home, compare mortgage rates now.

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