Blog
October 11th, 2011

Will mortgage rates keep falling?

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Whats NextBack in August, I’m not sure anyone anticipated that mortgage rates would fall as low as they have in recent weeks.

While HSH.com, along with many other mortgage-market observers, knew mortgage rates would remain at historically low levels, the depths to which they’ve fallen over the last two months surprised just about everyone.

And according to the latest forward-looking mortgage rate forecast from HSH.com, low mortgage rates are going to be around for a while.

Every nine weeks or so, HSH.com publishes a “Two-month forecast for mortgage rates.” The forecast reexamines the market’s behavior over the last two months and analyzes current market conditions to develop a forecast that provides specific numerical ranges of where we think mortgage rates will wander moving forward.

Here’s what we had to say last time around:

The hard stumble in the economy in the first and second quarters…will see us start the forecast period [August 6-October 10] at perhaps the lowest point for rates since last fall. While future fiscal action is unlikely, it’s no longer out of the realm of possibility that the Fed might again step into the market, but we still think it unlikely.

The traditional drivers for mortgage rates will be fully back in play for the forecast period. These include economic and job growth with perhaps a side order of inflation concerns. For the next 60 days–taking us though the end of the 3rd quarter–there should be a little upward progress, but there is little reason to expect a huge improvement in either of the first two, while the third may fade in importance to some degree, especially if oil prices remain below the century mark.

For the next nine weeks, we expect to see the average overall rate for the 30-year fixed-rate mortgage to wander in a range of 4.55% to 4.90%; five-one hybrid ARMs should find a pair of 3.25% to 3.65% bookends, while the conforming 30-year FRM will likely find 4.35% to 4.75% bounds. Great rates, all of them, courtesy of a lousy economy. Well, at least there’s the return before long of the pleasant diversion of watching football to keep us from staring at bleak economic news seven days a week.

So as you can see, our forecast–besides the actual figures we predicted–was nearlyspot on: The Fed has reentered the picture, economic and job growth remains minimal and inflation concerns have abated to a certain degree.

Mortgage rates expected to remain low

“Nine weeks is a short period of time, but quite a lot can happen during that time,” writes HSH.com VP Keith Gumbinger in HSH.com’s latest Two Month Forecast.

“We believe that the Fed will get its way, and interest rates will come down for longer Treasuries and mortgages alike. At the same time, we are perhaps more optimistic than some that the economy is showing signs of modest improvement; the 0.4 percent GDP of the first quarter gave way to the 1.3 percent of the second, for example.

“While 3Q11 will be no great shakes and probably no better than the second quarter, the effects of the difficult first half of 2011 continue to fall behind us, and the addition of the Fed’s involvement seems likely to move the GDP needle higher as we look toward the end of the year. As such, this forecast is confounded by two opposing forces.”

How low can they go?

You’ll have to read our latest Two Month Forecast to find out just how low we expect mortgage rates to wander over the next nine weeks.

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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.

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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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