Freddie Mac says mortgage rates will remain high amid inflation concerns

Freddie Mac’s latest economic forecast calls for mortgage rates to remain at 6.5% in the first half The Fed reacts to the latest news on inflation.

Freddie Mac economists expect recent economic growth to keep inflation above the Fed’s 2% target.

“As a result, we don’t expect the Fed to cut interest rates until this summer at the earliest, with potential upside surprises in inflation likely to provide a further boost,” Freddie Mac economists led by Sam Khater said in a blog post. Cut rates.” So in the short term, Treasury yields will remain high, which will keep mortgage rates high. “

Last month, Freddie Mac projected rates would remain at 6.5% in the first quarter and fall to 6% by the end of the year.

Latest primary mortgage market survey The 30-year FRM is 6.87%an increase of 13 basis points from the previous week.

Meanwhile, economists from the Mortgage Bankers Association called for transaction volumes in 2024 in a March forecast. A bit higher than expected in February.

The trade group’s latest forecast for trade this year is $2.01 trillion, compared with a forecast of $2 trillion in February.

MBA did not change its forecasts for $2.34 trillion in 2025 and $2.44 trillion in 2026.

Previously, Fannie Mae in March lowered its 2024 forecast by $15 billion and its 2025 forecast by $16 billion.This change is primarily due to Fannie Mae revising its rate forecast and now requiring a 30-year fixed-rate loan Maintain above 6% by the end of 2025.

On the other hand, MBA still believes that the 30-year FRM will fall back below 6% next year, although the rate is 6.1% this year; the partial interest rate outlook is unchanged from February.

In March, it forecast a growth rate of 5.9% in the first quarter of 2025, which was also the same as last month’s forecast. However, the average growth rate in the fourth quarter of 2025 was 5.6%, slightly higher than the February forecast.

Freddie Mac’s March blog post predicted that the housing market would recover modestly in the second half of the year as investors now expect the Federal Reserve to cut interest rates this summer and interest rates will fall.

“However, the recovery will be limited as the rate lock-in effect will prevent homes from coming to market,” the Freddie Mac blog said. First-time homebuyers continue to flood the property market This is plagued by a lack of supply. “

Freddie Mac no longer provides detailed volume estimates and its economic commentary. However, the company said that under its “base case” we expect dollar purchases to improve slightly in 2024 and 2025.

The blog post continues: “Despite firm price growth, our view on sources remains low as a modest recovery in home sales coupled with an increase in the share of cash purchases will limit any significant growth in source volumes.”

Refinancing volume will be limited because many homeowners lack the incentive to take action given the interest rates now compared to when they last applied for a mortgage.

“Overall, we expect total mortgage originations to remain low throughout most of 2024, but begin to increase towards the end of the year and see modest growth in 2025,” Freddie Mac said. “While our outlook Still optimistic, but given the struggle, caution is warranted against stubborn inflation that could persist for much longer.”

If credit quality deteriorates, as some expect, that could also affect forecasts, but Freddie Mac added that its baseline forecast does not foresee such an event occurring.

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