December Mortgage Rate Predictions
Based on the 3.97% mortgage rate that November averaged, we may see higher rates as we get closer to 2015.
With the slow movement of mortgage rates last month in November, and the nearing of a 4.0% averaged mortgage rate, many housing economists are now led to believe that we may see a bit of an incline this month in December. It is the last month of 2014 where low rates was once in trend. 2015 is just around the corner, and with several factors in mind that affect mortgage rates, this makes December’s rate prediction even more plausible.
In addition, mortgage rates are very susceptible to all aspects of the economy including job reports, Consumer Price Index, Gross Domestic Product, Home Sales, and Consumer Confidence indicators, to name but a few. Usually if there is bad news about the economy, the mortgage rates decrease and good news forces the rates higher.
Mortgage rates are also affected by inflation. If people are concerned about rising inflation, interest rates will rise to curb the supply of money and hence dampen down inflationary fears. Conversely in times of low inflation, mortgage rates will fall.
Reduced Inflation Rates
Inflation is an increase in the overall price level of goods and services in the economy (supply and demand). The Federal Reserve policymakers also take these steps as well when evaluating the rate of inflation. If inflation rates rise, the Feds decisions would be to either slow it down or remove it, however, by doing this mortgage rates could increase.
The evaluation process is overseen by the Federal Reserve in a manner of monitoring many different price indexes. The price of a group of goods and services is measured of its changes by a price index. The reason for the different price indexes used to track the products and service is because each index is calculated differently. For this reason, there can be many different given results about inflation.
For the past two years, inflation rates have shown to be pretty steady and below the Fed’s ideal rate by 2.0%. In this case, if inflation rates remain at a low for too long, a disinflation can take place, which may be able to help keep rates low.
For example, with the drop in oil prices, this promotes lower gas prices, in return will allow consumers to save and put back into the economy through holiday shopping.
U.S. Employment Rate Outlook
With the economic growth having to do with how rates move, employment rate is definitely one to consider of all factors affecting mortgage rates. According to a report last month on the nations employment rate, a labor report for October 2014 showed an additional net of 214,000 new Non-Farm payroll jobs. This additional amount adds up to 2.29 million jobs total for 2014 so far.
The growth in employment has capped 200,000 in a nine month streak. Since 2010, there has been well over 9,000,000 jobs added to the U.S. economy. With more of today’s population working, we should see more spending and an expected increase in inflation.
In a healthy and thriving economy, the Federal Reserve would more than likely hike up rates to balance everything out by increasing mortgage rates.
