Earlier this year, we said that we expected the 30-year fixed-rate mortgage to rise to 5%. For a while, we appeared clairvoyant. Rates took flight in May and continued to gain altitude through August. Many credit-market participants were expecting the Federal Reserve to begin tapering support for low interest rates beginning in September, thus rates ran up in anticipation of the event.

But as September approached, we become more circumspect on the Fed actually tapering. The economic data were simply too negative, pointing to continued low job growth and low inflation – two variables that carry considerable weight with the Fed. We even came out and predicted that the Fed was unlikely to begin tapering. We were one of the few market watchers who expected quantitative easing – purchases of mortgage and Treasury securities – to continue unabated.

Many market watchers now expect the Fed to begin tapering early next year; we're not so sure. Unemployment remains stubbornly high and economic growth remains stubbornly low. Little progress has been made on either front for most of 2013. By all indications, we don't expect much progress to be made in the near term.

In other words, we expect the Federal Reserve to continue to keep mortgage lending rates low. Of course, we can't say they will remain low through 2014, but we see them remaining low through at least the first quarter.

In the recent past, we've said that there was little impetus for the rate on the 30-year loan to fall meaningful lower. We'll amend that to say that we wouldn't be surprised to see 4% – a meaningfully low rate – on the 30-year loan before the end of the year.

Courtesy of Jessica Regan.

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