Mid-Year Update: 2010 Outlook for Mortgage Ratesby Tim Manni
On December 31, 2009, HSH.com released the “2010 Outlook for Mortgage Rates and the Mortgage Market.” We examined the 10 most important factors that we thought would influence mortgage rates and the overall mortgage market throughout the upcoming year.
It was a humbling experience as we went back to take a look at our original forecasts in order to make the appropriate mid-year updates.
The eighth factor on our 2010 Outlook is titled “Mortgage Rates Should Remain Favorable.” While we were correct in predicting that rates would remain favorable thus far, we didn’t anticipate that rates would fall like they have in recent weeks.
During 2010, the mortgage market will transition from almost-fully-government supported to one again driven by the private market to a much greater degree. As markets return to “normal”, so too will mortgage rates, which should still remain in a range among to the best seen during the past 50 years. However, barring a double dip to the recession, borrowers should have no expectations that rates will remain at multi-generation lows throughout the year.
Broadly, we expect interest rates to be lowest in the early part of the year, as support programs remain fully in force, with 30-year fixed-rate mortgages hanging around the 5% mark during the first quarter. After that we’ll start the transitional period described above, and for planning purposes, borrowers should expect figures one-half to even a full percentage point higher than this. We do think perhaps a half-point lift is most likely, but we may flare higher than that during the Spring at times. Any rise in rates would be accompanied by a reduced demand for mortgages, which in turn would serve to somewhat temper any upward rise.
…rates will nudge closer to 6% than 5% for the final two quarters of 2010.
We presently have the lowest mortgage rates in some 54 years in the market, far better than what we (or anyone else, for that matter) expected. The Spring lift in rates never materialized due to the conditions noted above, and the late Spring/early Summer slump in housing credit demand, overseas troubles, investor appetite for MBS amid weak supply dynamics and a soft economy are all serving to keep rates low.
Even with that, the year’s only half done. From where we are, we still think rates will be higher as the year comes to an end, but perhaps not higher than 5.5% to perhaps 5.625%, with 6% an unlikely target at this moment.
Click here to read all the updates we made to our 2010 Outlook for Mortgage Rates.
Looking for a more immediate forecast? Click here to view our “Two Month Forecast for Mortgage Rates.”