Another Year of Churning? Blame Big Productivity Gains.

This was supposed to be the year that interest rates started a gradual rise, slowing the three-year-old refinancing mania and giving servicers a reprieve from portfolio churning and weak prices for servicing rights.

But then again, that's exactly what we said at the beginning of last year, too. And for that matter, at the beginning of 2002.

So why do we keep getting the big picture - which way rates are going to go - wrong?

Productivity, it seems, is a key reason. While gains in productivity may be good for the economy in the long haul, they are dampening job production in the near term. That, in turn, is letting steam out of a growing economy and minimizing upward pressure on interest rates.

Time and again we've predicted, or reported that others have predicted, that rates are likely to start edging upward. The recession is over. Gross domestic product is growing rapidly. The federal government is competing with private enterprises to borrower money in the capital markets. Plenty of indicators suggest that rates should be rising.

Instead, rates remain stubbornly low. In early march, the average interest rate on new 30-year mortgages once again fell below 5.5%, a threshold that once seemed unimaginable.

Increasingly, economists say that soaring productivity is part of the answer for the persistently low rate environment.