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We’re only a few weeks into the new year and there have already been some unexpected changes to mortgage rates. At the end of 2013, rates were 1.125% higher than at the same time in 2012. This trend of higher rates was expected to continue into 2014, but now that 4 weeks have passed, the rates have surprisingly trended lower.

According to the most recent Freddie Mac Primary Mortgage Market Survey® (PMMS®), average fixed mortgage rates have continued to drift lower for two weeks in a row, despite reports that inflation remains at a standstill.  

Here are more details from the report:

– 30-year fixed-rate mortgage (FRM) averaged 4.39 percent with an average 0.7 point for the week ending January 23, 2014, down from last week, when it averaged 4.41 percent. A year ago at this time, the 30-year FRM averaged 3.42 percent.

– 15-year FRM this week averaged 3.44 percent with an average 0.7 point, down from last week when it averaged 3.45 percent. A year ago at this time, the 15-year FRM averaged 2.71 percent.

– 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.15 percent this week with an average 0.5 point, up from last week when it averaged 3.10 percent. A year ago, the 5-year ARM averaged 2.67 percent.

– 1-year Treasury-indexed ARM averaged 2.54 percent this week with an average 0.5 point, down from last week when it averaged 2.56 percent. At this time last year, the 1-year ARM averaged 2.57 percent.

These lower rates can be attributed to the combination of last Friday’s big miss on the employment report and the current low inflation level. Furthermore, moderate growth was revealed by the December Retail Sales report. Considering that retail sales account for almost 70% of economic activity, investors leave no stone unturned when it comes to analyzing this data. The Consumer Price Index (CPI) and the Producer Price Index (PPI), two of the more significant monthly inflation reports, confirm that inflation remains on the backburner. Core CPI was a mere 1.7% higher than a year ago, significantly less than the fed’s target level of 2.0%, while Core PPI was even lower, at 1.4%, on an annual basis.

To sum it all up, moderate economic growth and low inflation portrays moderate conditions for mortgage rates. The newest employment report will be released on the first Friday of February and is the next big economic factor that could have a major impact on mortgage rates. Until that time, you should expect rates to remain stable with a small chance of improvement. If any of your clients are interested in floating rates, now would be the time to look.

Share the Homes.com mortgage calculator with your clients to help them figure out their finances and to help determine what properties would be their best fit. Check out Homes.com’s Local Market Index and Rebound Reports for more information on the current state of the housing market.