The holidays have arrived. The end of the year is upon us. And home loans are cheaper than they were when 2014 began.
Back in January, the average 30-year, fixed-rate mortgage — the most popular way to finance a home — cost 4.69%.
The consensus among economists and industry analysts was that it would rise to 5.5% by the end of the year.
Yet rates have declined, reaching as low as 4.01% in mid-October and only 4.07% in our most recent survey of major lenders.
Home loans haven't been this cheap since May 2013.
The typical 30-year, fixed-rate home loan costs a half point less than this time last year, which saves borrowers $30 a month for every $100,000 they borrow.
And that's just looking at the average cost of financing a home.
Savvy borrowers with decent credit can almost always pay a quarter to half point less than that.
Spend a few minutes searching our extensive data base for the best current mortgage rates from dozens of lenders in your area. You'll see what we mean.
Why did everyone think mortgage rates were going to go up this year?
The Federal Reserve ended its campaign to drive down long-term interest rates, including mortgage rates.
The nation's bank-for-banks began buying $85 billion worth of debt a month in September 2012, a fairly even split between Treasury bills and bonds backed by thousands of home loans.
By flooding the mortgage market with money, it pushed mortgage rates to record lows in an attempt to boost real estate sales and property values.
It began to gradually reduce those purchases last January and bought its last $15 billion worth of bonds in October.
So why are mortgage rates defying all expectations?
One reason is the weak demand for new loans.
Millions of homeowners leapt at cheaper mortgages when interest rates were falling. Many refinanced twice. Some replaced their loans three times.
That boom is over.
The Mortgage Bankers Association expected refinancings to fall by more than half this year, but they're actually off by more than 60%.
The association expected some of those losses to be offset by a 10% rise in home sales and corresponding increase in demand for mortgages to finance those purchases. But home sales have sagged this year and the demand for loans to buy homes is down about 15%.
As a result, Americans will take on less debt through new mortgages than in any year since 1997.
The Fed's exit from the market just hasn't mattered and that's been reflected in lower interest rates — at least not yet.
The MBA is projecting that the average cost of a 30-year fixed-rate loan will steadily rise through 2015, reaching 4.4% by the end of March, 4.6% by the end of June, 5.0% by the end of September and 5.1% by the end of the year.
But for now, home loans are not only cheaper, they're also easier to get.
Home buyers with conventional loans closing in October had an average FICO credit score of 754, according to Ellie Mae Inc., a California-based mortgage technology firm whose software is used by many lenders.
That's down from an average of 759 in 2013 and 763 in 2012.
The average FICO score for homeowners who refinanced through a conventional loan was 734 in October, down from an average of 747 last year.
FHA loans clearly helped borrowers with too much debt and lower credit scores.
The average FICO score for purchases dropped from an average of 700 in 2012 to 695 in 2013 and just 683 in October.
It's also taking less time for loan applications to be processed and approved — an average of just 40 days in October. That's down from 46 days last year and 48 days in 2012.
Those are exactly the kinds of trends that help borrowers land the loans they need.