Predictions Abound as Mortgage Market Enters Uncharted Territory
by Tim Manni
Today, April 1, is day one in the mortgage market’s expedition into uncharted territory — uncharted in the sense that mortgage rates have been corralled by the Fed’s MBS-purchase program for well over a year now.
The big question — the 800-pound gorilla in the room, if you will — has been, “what will happen to mortgage rates now that the Fed has stepped out of the picture?”
The answer to that question largely depends on several factors, but mainly hinges on if private investors are willing to once-again invest their money into mortgages.
Our friend Jamie Smith Hopkins at the Baltimore Sun asked the readers of her blog, The Real Estate Wonk, for their predictions. Here are some of the responses:
“…mortgage interest rates are going to rise and may do so quickly, like .50% to 1% in a matter of a weeks.”
“I predict mortgage rates will go up to 6.0% to 6.5% by the end of the year.”
“Bottom, bottom line, rates don’t move much, but its due to more smoke and mirrors, central planning tricks, not fundamental market forces. Absent trickery and manipulation we’d quickly be north of 6.5%, about where we were before the trickery began.”
What Do We Say?
In our latest Two-Month Forecast for Mortgage Rates we wrote that, “If everything works as planned, we think that the next nine-week period will see HSH’s overall FRMI trend between an average rate of 5.25% to perhaps 5.60%. At the same time, the overall 5/1 ARM will likely wander from perhaps 5.25% to 5.60%. Although we don’t usually provide an outlook for conforming 30-year fixed rates by themselves, we’ll wing it a little this time, and call for a 5% to 5.40% range over the next couple of months.”
Only Time Will Tell
It’s going to take more than a few hours into the first day of the Fed’s absence to see where rates are headed. The problem with all the predictions you have read is that they’re all based on things that haven’t happened yet. All you can do is examine the past trends, look at the present factors and make an educated guess. In the words of our VP Keith Gumbinger, “Forecasting is more of an art than a science.”
You can follow mortgage rates daily or weekly at HSH.com.
