Mortgage rate patterns bode well for spring

mortgage interest rate Up 9 basis points this weekbut has remained within the same range since mid-December, which heralds the spring home-selling season.

The government-sponsored enterprise’s primary mortgage market survey found the average interest rate on a 30-year fixed-rate loan was 6.69% on Jan. 25, up from 6.6% the week before. A year ago it was 6.13%.

However, the 15-year FRM average rose 20 basis points weekly, rising from 5.76% to 5.96%, after five consecutive weeks of declines. During the same period in 2022, the 15-year average is 5.17%.

Still, interest rates remaining within their current range are a good indicator of normal seasonal buying patterns.

“With interest rates stable, potential homebuyers concerned about affordability have Jumping over the fence and back to the marketSam Khater, chief economist at Freddie Mac, said in a press release. “Despite ongoing inventory challenges, we expect the spring homebuying season to be busier than in 2023 and that home prices will continue to rise steadily.”

The interest rate news didn’t dampen Thursday morning’s unexpectedly good gross domestic product report. Although the 3.3% growth rate in the fourth quarter was slower than the previous three months, it was better than expected.

ZIllow reports that on Thursday morning, the 30-year FRM average rose 2 basis points from Wednesday to 6.45% and was 10 basis points higher than the previous week’s average. The benchmark 10-year FRM Treasury rate, which is used as a factor in mortgage pricing, rose from a low of 4.09% on January 18 to a high of 4.20% the next day and has fluctuated in and out of that range since then.

But the 10-year Treasury yield did fall 4 basis points from its closing price of 4.14% just before noon Thursday morning after the GDP report was released.

GDP was 3.3%, down from 4.9% in the third quarter. However, Fannie Mae forecasts just 1.2% over that period, while the Mortgage Bankers Association predicts 0.9%.

although Fannie Mae no longer expects recession to comeIn its January forecast, MBA still expected negative GDP growth in the first and second quarters.

MBA chief economist Mike Fratantoni said in a statement after the GDP release that economic growth is consistent with strong employment, which is good news for the housing market, as it should be able to maintain strong demand.

It also pointed to further declines in inflation, which should allow the Fed to maintain its goal of cutting short-term interest rates. MBA’s January forecast for 2024 was little changed, with total output just over $2 billion.

“2023 is a much better year for the broader economy than we expected, despite the downturn in the housing and mortgage markets,” Fratantoni said. “While we still expect the economy to slow in 2024, But this strong momentum is less likely to decline sharply in the fourth quarter.”

Sophie Lund-Yates, chief equity analyst at British investment banking firm Hargreaves Lansdown, took a different view, saying people should not expect “significant cuts” in interest rates from the Fed.

“At this point, it appears that the winds in the U.S. economy may be too strong for the Fed to change course,” Lund-Yates said in a statement. “This may cause some jitters in the market, but the market remains optimistic that Cuts should be made sooner rather than later.”

The market has expressed some concerns about when the Federal Reserve might start cutting interest rates. Chief economist Doug Duncan told National Mortgage News earlier this week that seven rate cuts are expected this year, but Fannie Mae is currently forecasting only four cuts.

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