Points in Our Favor: 2015 Mortgage Rates Looking Good

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When it comes to predicting mortgage interest rates, during certain years economists are the smartest persons in the room. 2014 was not one of those years.

In 2014, economists theorized that when the Federal Reserve stopped its program of buying longer-term treasuries and mortgage-backed securities, rates would rise. Freddie Mac’s deputy chief economist Len Kiefer said that he expected the average rate to rise to 5.1 percent by the end of 2014. Later in 2014, he pulled back his prediction to 4.3 percent. This prediction was still too high.

For 2015, Freddie Mac’s chief economist Frank E. Nothaft – who is also a lecturer at Georgetown University – said he expects to see interest rates climb throughout 2015, averaging about 2.9 percent for 10-year treasuries and 4.6 percent for 30-year mortgages.

Some economic forecasters think the Fed’s board of governors will not raise rates in 2015. Their rationale is that the euro, which is racing toward parity with the strengthening dollar, is making U.S. goods expensive for our trading partners. If the Fed raises rates, the dollar would get even stronger, harming the U.S. economy. Because of this and other factors, it seems unlikely that rates will be raised in 2015.

Local real estate has benefited from the strengthening economy and low interest rates.

When asked for some highlights of the Georgetown real estate market, Michael Brennan Jr. of the Georgetown office of TTR Sotheby’s said, “One of the most remarkable events in Georgetown real estate in 2014 was the rollout of 1055 High. In just seven days’ time, all seven units sold, all cash, all over list price.”

Looking at the start of 2015, Brennan said that, as of early February, “There are only three houses listed for sale in Georgetown below $2 million. With available inventory this low, buyer demand will remain strong for our neighborhood in 2015.”

The most notable listing so far – the Fillmore School building and property – was just listed by TTR Sotheby’s for $14 million.

Clearly, Georgetown continues to be one of the hottest addresses in Washington and in the county. A well-balanced community with strong residential, business, restaurant and workspace components, it also continues to be one of the safest neighborhoods in D.C.

With mortgage interest rates flirting with two-year lows, the affordability index is at one of its highest points ever. It looks like 2015 will be an excellent year for real estate and mortgage rates.

Bill Starrels lives in Georgetown and is a mortgage banker specializing in residential purchase and refinance mortgages (NMLS#485021). Reach him at 703-625-7355.

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