Mortgage Rates Dropped Steadily Throughout 2014, Experts Say

(Long Island, NY) The housing crisis, while still holding the country in its iron fist for several years now, finally appears to be loosening its grip; this not only serves as a positive indicator of things to come in the mortgage industry, but also good news to countless families who have been holding off on purchasing a home due to skyrocketing rates and unobtainable loans. 2014 in particular was a red-letter year for prospective home buyers, as several of the most popular loan types saw significant drops in interest rates. What this adds up to is good news for families looking to purchase a new home in 2015.

According to The Mortgage Reports, interest rates are dropping almost across the board on all major mortgages; among them, VA (Department of Veterans Affairs) mortgage rates were the lowest, followed by FHA (Federal Housing Administration) mortgage rates, then conventional rates.

“For all of 2014, 30-year and 15-year mortgage rates moved lower steadily, bestowing cheap financing opportunities upon active home buyers and existing homeowners in looking to save money via a refinance,” they said. “VA mortgage rates averaged 3.97% during November. The next-lowest mortgage rate was the average rate for an FHA loan. FHA mortgage rates averaged 4.15% nationwide. This is below the average interest rate on November closed conventional loans.”

The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses. A FHA mortgage loan is a loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford.

Of all tracked loan types, mortgage interest rates for conventional loans were the highest; conventional mortgage rates averaged 4.32% in November, a full one-eighth percentage point higher than the average rate of all loans closed. Still, because FHA-insured homeowners are required to pay annual mortgage insurance premiums, the gap between using a FHA mortgage or a conventional mortgage is slightly smaller than one would think upon first glance at the figures, which have FHA mortgages beating conventional ones by about a quarter-percent. Still, a dollar saved is a dollar earned, as they say.

The Mortgage Reports notes that this drop was wholly unexpected; as 2013 drew to a close, the Federal Reserve announced that it would wind down its third round of quantitative easing (QE3) though 2014 and Wall Street expected this move to lead mortgage rates higher. However, this was clearly not the case in the long-run, Mortgage Reports said.

“A series of worse-than-expected economic data have combined with new geopolitical risks to stoke a trading pattern known as ‘safe haven buying,’ which is characterized by investors seeking safety of principal during periods of uncertainty,” they said. “The Federal Reserve has since exited the MBS market, but an influx of investors has replaced the Fed’s presence. Demand for mortgage bonds remains elevated. Meanwhile, the supply of MBS for sale has been dwindling. There are fewer mortgage bonds issuances available because mortgage origination volume is down nationwide. Steady demand with reduced supply leads to higher prices and, with mortgage bonds, higher prices mean lower mortgage interest rates.”

While things are looking rosy for those looking to apply for a home mortgage, things may be soon looking rosier still, especially for those interesting in a FHA loan; The Hill reports that a group of 18 senators urged Housing and Urban Development Secretary Julian Castro to lower the fees on FHA loans, which in turn will result in greater savings for those utilizing them, they said.

“For many people, a home is the single most important purchase they will ever make in their lives; the dream of many, home ownership has been dangled just out of reach of many in recent years, but this new news regarding dropping mortgage interest rates, particularly with VA, FHA, and conventional loans, is lighting a spark of hope for the recovery of the national economy, and more importantly, for the average American family looking to start their lives and pursuer their dreams” said Mark from Las Vegas, a professional we spoke with from BRHomeLoans.com, a service dedicated to shopping the best rates for the FHA mortgage shopper. “We’ve already seen an uptick in inquiries since news broke.” he added.

“As any business knows, just as a price that is set too high will lead to less profit, not more, lowering the premium on qualified borrowers may actually produce greater revenue and fully restore the capital ratio more quickly,” the senators said in a statement. “We congratulate you on the vast improvement in the FHA’s financial position and urge you to use this opportunity to ensure that premiums are set at a level that balances both sustainability and affordability.”

According to the Hill, the senators said lowering the fees could provide a boost to the housing market and help the economy overall. Their suggestions came as the FHA released a report showing it has nearly fully recovered from losses incurred during the 2008 housing crisis.