NEW: HSH.com’s Two-Month Forecast for Mortgage Rates
by Tim Manni
A lot has changed since December 2009 when we wrote both our last two-month forecast and our 2010 Outlook for mortgage rates. We decided to delay the release of the February two-month forecast in order to give us some more time to consider the changes that were and still are forming in the mortgage market. Although delayed, we have published the latest Two-Month Forecast for Mortgage Rates.
At the dawn of the new year, the Fed was slated to move forward with their plan to end their mortgage-backed security (MBS) purchase program on March 31, 2010 — a plan that for nearly 16 months drove mortgage rates down to record lows. At that time, there was no other plan in place to pick up where the Fed’s plan would leave off. However, a lot has changed in three months.
Due to two recent developments, Fannie Mae and Freddie Mac are expected to be even more involved in the mortgage market than usual in the coming months. Those plans will utilize Fannie and Freddie in ways that are designed to keep mortgage rates from increasing by as much as we originally forecast at the end of last year.
Since the [December] forecast, several new mechanisms have been introduced which will significantly influence rates and markets in the coming weeks. Six days after the last forecast was released, a late Christmas Eve announcement came that Fannie and Freddie would essentially be allowed to incur unlimited losses and eased portfolio size restrictions for the two GSEs. The expansion of portfolio holdings and available cash resulted in a program announced in mid-February where up to $200 billion in delinquent loans will be “bought back” from investors.
There are a lot of hopes and expectations for the spring homebuying season. While there may be tools in place to soften the Fed’s transition out of the mortgage market, whether or not those tools can help foster increased demand or stabilize home prices has yet to be seen.
Be sure to read “HSH.com’s Two-Month Forecast for Mortgage Rates“ to learn how we think mortgage rates will behave over the next two months, and why.
