What Will 2015 Bring for Mortgage Rates?

After years of economists predicting hikes, mortgage rates finally look set to increase in the coming year, though the trend is expected to be a bumpy one.

With the Federal Reserve recently ending its monthly asset purchases and turning toward the possibility of bringing short-term interest rates up in 2015, analysts (including economists at Freddie Mac, Fannie Mae, the Mortgage Bankers Association, and other housing groups and companies) are calling for the average 30-year fixed mortgage rate to rise to nearly 4.5 percent, with some calling for an average closer to 5 percent.

Greg McBride, chief financial analyst for finance website Bankrate.com, expects the average 30-year fixed rate will lift off from a final 2014 reading of 3.96 but still remain below 5 percent, mostly due to volatility in the year's first half.

"I expect we'll see rates go even lower than they are right now in the first few months of the year, but as we go into the second quarter with the Fed's [rate hike] timetable coming into clearer focus, we're going to start to see mortgage rates go higher," McBride said.

As of January, policymakers at the Fed had yet to assemble a timetable for when the central bank will start bringing up rates, but the perspective offered by most of the voting members of the Federal Open Market Committee seem to point to a slow build. In a panel hosted at the American Economic Association's annual meeting in early January, Boston Fed President Eric Rosengren said the Fed is in an unusual position at the moment, especially as other central banks around the world make moves to ease their own monetary policy in the face of recessions.

"Central-bank balance sheets are in a very different position than they normally are, so that is an unusual feature of this cycle," Rosengren said. "But certainly, the fact that we're at a point where [rate] normalization's being discussed is a positive one."

While the global economic situation could mean another year of missed forecasts for mortgage rates, the Fed's turn toward (slightly) less accommodating monetary policy suggests 2015 will be the year in which rates start to ascend meaningfully.

In the meantime, McBride says Fed officials need to be careful about what they say and do so as not to spook the financial markets—like in 2013, when just the mention of slowing down asset purchases sent mortgage rates climbing.

"This is a period of transition, and the Fed has to prep markets for the eventuality of interest rate hikes. They have to communicate the timing of it once it comes into focus for them," he said. "And markets are particularly sensitive to monetary policy. All of that is a recipe for some sort of market overreaction somewhere along the way."