Mortgage Rates Decline; Rises Loom in Future

By: Brian Powell - April 14, 2014

As the spring season rolls in and the winter doldrums roll out, people are finally exiting their homes and exploring the world once again. Luckily for those recovering from an intense winter hibernation, the economy shows positive signs for the first quarter. Job growth increased by 192,000 for the month of March, and unemployment remained at 6.7 percent. More important for future home-buyers, though, was news that mortgage rates are slowly declining despite fears of an increase in 2014.

Recent reports show that average mortgage rates fell from 4.5 percent to 4.375 percent at the beginning of April, a much-needed positive sign for the housing market.

While most big banks are reporting a drastic decline in the number of mortgage originations for the first quarter, with Wells Fargo reporting a 67 percent decline in originations and JP Morgan reporting a 68 percent decline, most signs showcase that for the month of April, more homeowners are coming onto the market and expressing interest in purchasing a new home.

The Mortgage Bankers Association has reported a 13 percent increase in home-purchase mortgage applications over the past five weeks, hitting a two-month high.

Along with a recent increase in home-buying applications, US consumer confidence ratings hit its highest point in the past six years, indicating that consumers feel secure in the current economic climate and are more willing to make large purchases.

The surge in demand for houses and the rise in mortgage applications may simply be a brief blip on the radar, however.

Mortgage rates increased over the past year most likely in response to news that the Federal Reserve was going to draw-back on its bond-buying program, pulling $10 billion from the economy in monthly installments until the average monthly investment dropped from $85 billion to $55 billion.

Once this transition is complete, much economic pundits believe mortgage rates will increase. Because of this, many first-home-buyers may be rushing to the market now to circumvent potential higher mortgage rates in the future.

If the Fed is planning on pulling $30 billion out of the US economy each month soon, it should hope that banks keep mortgage rates low. Lower mortgage rates spur increased consumer spending, a sector which accounts for 70 percent of the US GDP.

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About the Author

Brian PowellBrian Powell is a contract writer for WebProNews. In his day job, he is a teacher and tutor for The Princeton Review. He also serves as an assistant coach to Transylvania University's Speech and Debate team.

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