Bridge Builders™

"One thing seems certain: we aren't likely to see average 30-year fixed mortgage rates return to the historic lows experienced in 2012."

- Freddie Mac,  March 24, 2014

There are those that hope that 30-year mortgage interest rates will head back under 4%. Obviously, for any prospective home purchaser that would be great news. However, there is probably a greater chance that interest rates will return to the greater than 6% rate of the last decade before they would return to the less than 3.5% rate of 2012.

Freddie Mac, in one of four original posts on their new blog, explained that current rates are still extremely low compared to historic averages:

It is projected that if the Fed continues to cut back on bond purchases that long term mortgage rates would start to climb. Many experts felt that Janet Yellen, who replaced Ben Bernanke as Fed Chair, was going to be less inclined to continue tapering bond purchases at the level established.

However, in her testimony in front of the Financial Services Committee last week, Yellen made it quite clear that she will in fact continue the current pace of tapering:

Many pundits are warning that there will be a drop in real estate values because mortgage rates are beginning to increase. The logic makes sense. However, history shows that increasing rates have not negatively impacted home values in the past.

Four times over the last 30 years mortgage interest rates have dramatically increased. Here is the impact the increases had on home values at the time: