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December 2nd, 2009

What Will Rates Look Like in 2010?

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In case you haven’t read it already, our very own VP Keith Gumbinger spoke with SmartMoney.com earlier this week, and gave our take on where we think mortgage rates are headed next year.

Lisa Scherzer of SmartMoney.com begs the question, “What will happen to mortgage rates when the Fed stops manipulating the market?”

However, we can’t help but wonder if the Fed will even decide to end their mortgage program as scheduled. They’ve already extended it once, concerned that the private market wasn’t ready to survive on its own, and if market conditions haven’t stabilized by the end of the first quarter 2010 (the scheduled expiration date), the Fed could decide to keep this program in place even longer. Here’s what Keith had to say (emphasis added):

If and when the Fed program does end, mortgage rates will rise – but not by much. The Fed’s intervention is worth upwards of 75 basis points for a conforming loan, says Keith Gumbinger, a vice president at HSH Associates. Without its purchases, that rate might rise to 5.75% or so.

Borrowers should plan for rates to run in the mid-5% range once the program comes to an end. After that, any shift depends on whether the economy has gained more traction and if the job market is improving. Otherwise, rates don’t have the space to push higher, Gumbinger says.

The outlook for late 2010: “You’ll probably see us moving closer to the 6% range if our forecast works out,” Gumbinger says. “Those are still very favorable interest rates. Anything below 6% is a really extraordinary rate.”

For more on the subject, please read:
-Update1: What Would Mortgage Rates Be Like Without the Fed?
-Did the Fed’s Mortgage Support Program Work?

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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