While many economists said both home prices and mortgage rates would be up before the end oft he year, mortgage rates have fallen short of expectations and continue providing high affordability to prospective buyers throughout the remainder of the year. Mortgage records from the most recent Primary Mortgage Market Survey shows average rates for fixed-rate mortgage fell closer to record lows set earlier in November, while rates for adjustable-rate mortgages continue to climb higher.
The average rate for 30-year FRMs was 3.32 percent for the week ending December 13, down from the previous week's average of 3.34 percent. The record low set just last month indicated rates would probably remain low throughout the remainder of the year, which has also seemingly prompted more buyers to begin their home search, as applications have been on the rise. Low rates have helped offset higher home prices, though both housing market factors are proof of an improving industry. Thirty-year FRMs are a popular option for first-time buyers, as they have more wiggle room with lower monthly payments, and current homeowners may choose this longer, fixed-rate option for lower monthly payments as well.
Additionally, the average rate for 15-year FRMs slipped from levels seen last week, falling to 2.66 percent from 2.67 percent. Both recent rates are significantly lower than this time a year ago when the average rate was 3.21 percent. This option may be more popular for current homeowners who have seen an increase in their income since they first purchased their home, as monthly payments are often higher, though rates are often much less than longer fixed-term options.
Adjustable rates attractive to some buyers and those refinancing
For some buyers and refinances, adjustable-rate mortgages could trump fixed-rates, as they can be relatively low throughout the initial year of the loan. After that, rates fluctuate, but could provide the lowest option depending on market conditions. Data from the PMMS shows the average rate for 5-year ARMs continues the upward trend toward levels from a year ago, when the average was 2.86 percent. This week's average was 2.70 percent, up slightly from 2.69 percent from last week.
News of lower mortgage rates could prompt more buyers to make real estate moves, though Freddie Mac doesn't expect rates to get higher than 4 percent in 2013.