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Mortgage Rates Remain Low but Will Head Higher in 2015

Average mortgage rates today on 30 year conforming loans are back below 4.00 percent this week. Current mortgage rates on 30 year conforming loans are averaging 3.98 percent, down sharply from last week's average 30 year rate of 4.12 percent. 15 year conventional mortgage rates are lower this week averaging 3.13 percent, down from last week's average 15 year rate of 3.14 percent.

If 10 year bond yields remain near current levels of 2.25 percent, 30 year rates will end 2014 below 4.00 percent and 15 year rates will remain near 3.10 percent. At the beginning of 2014, average 30 year conforming rates were expected to end the year near 5.00 percent and 15 year rates near 4.00 percent.

Rates moved higher early in 2014 in anticipation of the Federal Reserve winding down the third round of quantitative easing. The Fed started winding down QE3 early this year and concluded their purchases in October. Long term bond yields and mortgage rates initially moved higher this year but ended the year much lower than what was expected.

Looking ahead to 2015, mortgage rates will eventually head higher as the U.S. economy gains momentum and the Federal Reserve increases interest rates. The Mortgage Bankers Association's 2015 mortgage rate forecast is for higher mortgage rates throughout 2015. The first forecast is for 30 year rates to hit 4.4 percent and to hit 5.1 percent by the end of 2015.

The housing market is also expected to be brighter in 2015 due to historically low mortgage rates, a strengthening economy, and a stronger jobs market. According to the National Association of Realtors, home sales and home prices are expected to move higher next year. All these factors make now a good time to buy a home. Likewise, if you're considering refinancing your mortgage, you should do so before refinance rates move higher in 2015.

When mortgage rates increase, the monthly cost of owning a home increases because you're paying more in interest payments. For example, a $400,000 mortgage loan financed for 30 years at 4.00 percent costs $1,910 a month. The same $400,000 financed at 5.00 percent costs $2,140 a month, or $230 more a month.

Listed below are today's mortgage rates on conforming and jumbo loans

  • 30 Year Conforming 3.96%

  • 15 Year Conforming 3.13%

  • 5 Year Conforming ARM 3.11%

  • 30 Year Jumbo 4.29%

  • 15 Year Jumbo 3.94%

  • 5 Year Jumbo ARM 3.60%

Author: Brian McKay
December 26th, 2014