This morning Freddie Mac released the last Primary Mortgage Market Survey of the year. Rates on fixed mortgages were virtually unchanged from last week, with the average rate on a 30-year fixed rate mortgage at 3.35% and the 15-year fixed rate at 2.65%. Despite a lot of day-to-day volatility, rates have been in essentially the same range for the past four months. In a press release, Frank Nothaft, vice president and chief economist for Freddie Mac commented:
“Mortgage rates ended this year near record lows. The 30-year fixed-rate mortgage averaged 3.66 percent for 2012, the lowest annual average in at least 65 years. Rates on 30-year fixed mortgages were nearly 0.6 percentage points below that of the beginning of the year, which translates into an interest payment savings of nearly $98,600 over the life of a $200,000 loan. Moreover, opting for a 15-year fixed mortgage at today’s rates, a homeowner could save an additional $138,400 in interest payments.”
Although rates on adjustable rate mortgages improved only slightly this year, rates on fixed rate mortgages fell by 50-60 basis points since January. This improvement has been largely the result of a massive amount of support from the Federal Reserve and partially a result of the stagnant economy and other headwinds.
I anticipate that we will see a short-term spike in rates after the resolution of the budget talks. The tax increases and spending cuts that will result from the fiscal cliff resolution (or going over the fiscal cliff in the event that talks completely fail) will likely deduct somewhere between 1-3% from GDP in 2013. I think we probably face continued economic stagnation next year, and that rates will float somewhere between 3.5-3.875% for the majority of next year.
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