2012 Mortgage Market: Year in review

As we wrap up 2012, the good news is the average mortgage rate[1] did not go above 5.000%.    Data analyzed at the end of 2011 was the justification for our prediction and the year proved “normal trends” were redefined.  The rate ends 2012 at 3.350%.  For all of 2012, the rate never rose above 4.000% and the yearly average wound up at 3.648%

Those consumers who could qualify for a traditional mortgage or who were eligible for one of the Obama administration “Making Homes Affordable” programs nabbed historically low rates.  The dollars shaved off their monthly mortgage payments as well as overall interest savings was welcome news to the economy.  Many more consumers took another road and used the lower rates to reduce their mortgage terms.  The 30 year term was quickly replaced by the more popular 20 year or even 15 year term.  The bottom-line was repositioning and improving their financial health.

The Economy

Mortgage payments are most consumers’ largest household expense.  The rates of 2012 were too good to pass up for those who refinanced.  Just as important, they provided a solid reason for those in the important purchase market to snap up bargain, just before the housing market improves and pricing heads back up.   The rate metric helped an otherwise tepid economy show steady gains.

The Election

It was forecast rates would be very stable up until the national Presidential election.  Even though candidate Mitt Romney claimed to be stunned he did not win, now that President Obama was granted another four years, voters as well as the general public will insist the economy show more robust improvement.   As that happens and consumer confidence improves, the result will be an increase in rates.

In the meantime, 2012 saw a very stable rate pattern which did not move higher than six tenths of one percent.

[1]  Conforming 30 Year Fixed Rate Mortgage