In this article, we'll explore the latest predictions for mortgage rates over the next 90 days. During the upcoming three months, it is expected that mortgage rates will persist within the range of 6.35% to 6.89%. For prospective homebuyers and current homeowners, keeping a close eye on mortgage rates is crucial in determining when to make a move in the housing market.
Mortgage Rates Forecast for Next 90 Days
Recent data from Freddie Mac indicates a notable increase in the average 30-year fixed rate mortgage (FRM), which surged from 6.74% on March 14 to 6.87% on March 21.
Sam Khater, chief economist at Freddie Mac, attributes this uptick to several factors, including a slight expansion in existing home inventory and an uptick in new home construction. Despite the elevated rates, there's a palpable sense of optimism among homebuilders. They're banking on pent-up demand, a persistent supply shortage, and expectations of rate cuts by the Federal Reserve later in the year.
Current Landscape and Forecasts
Inflationary pressures in 2022 prompted the Federal Reserve to take corrective measures, resulting in a spike in the average 30-year fixed-rate mortgage in 2023. However, with inflation showing signs of cooling off and the economy displaying indications of a slowdown, experts anticipate a gradual descent in mortgage interest rates throughout 2024.
While projections offer insights, it's essential to acknowledge the inherent unpredictability of the market. Rates may fluctuate unexpectedly due to various factors, including global events impacting economic stability.
Expert Predictions
Several housing authorities have provided forecasts for the second quarter of 2024, offering a range of predictions for the average 30-year fixed interest rate:
- Fannie Mae: Positioned at the lower end of the spectrum, Fannie Mae projects the average rate to settle at 6.30%.
- National Association of Home Builders (NAHB): Foresees a slightly higher rate, estimating it to be 6.39%.
- Mortgage Bankers Association (MBA): Shares a forecast of 6.60%, along with the National Association of Realtors (NAR) and Wells Fargo.
- National Association of Realtors (NAR): Aligns with the MBA's projection of 6.60%.
- Wells Fargo: Echoes the consensus, expecting the rate to hover around 6.60%.
While variations exist among these forecasts, the average prediction for the second quarter of 2024 stands at 6.50%.
Despite speculation about potential changes in Fed policy, it's crucial to note that long-term mortgage rates have already retreated significantly from their 22-year highs in October 2023. While not reaching historical lows, current mortgage rates are comparable to those of the previous year.
Examining historical data, it becomes apparent that the federal funds rate's impact on long-term mortgage rates is not always direct. Even if the Fed were to cut rates, recent examples show that mortgage rates can behave independently, influenced by various market factors.
Technical factors, such as changes in Mortgage-Backed Securities (MBS) supply and demand, play a pivotal role in shaping current mortgage rate trends. Issues with banks and a potential recession impacted MBS demand, contributing to the rise and fall of mortgage rates.
Several elements, including yield spreads, Treasury bond supply, and recession concerns, contributed to the considerable decline in mortgage rates over the last few months. Understanding these factors provides insights into the complex dynamics affecting mortgage rate movements.
Mortgage Rate Forecast Analysis
The current economic scenario indicates a robust and resilient market. The economy is powering along, characterized by tight labor markets and stable wages. However, this economic strength poses challenges for further progress on core inflation. The service prices also remain at a level that may make advancing core inflation more challenging than the preceding months.
The key driver for potential shifts in mortgage rates is inflation. The data suggests that while the last six months have shown positive steps, inflation hasn't quite reached the Federal Reserve's 2% core PCE goal. The forecast anticipates that by March, core PCE will have been around the 2% mark for about nine months, potentially prompting the Fed to consider a move. However, there is a cautious note about the central bank's preference for a more extended period of low inflation, possibly close to a year.
Considering the current economic landscape and inflation trends, Hsh.com provides a detailed forecast for mortgage rates over the next nine weeks.
The latest Fed meeting has passed, with no change to interest rates and no specific promise that the Fed will be cutting rates very soon. Financial markets appear to have taken the Fed's updated stance to mean that restrictive monetary policy will be in place for longer, dampening economic growth and pressing inflation even lower, at least in the short term.
Mr. Powell's comments after the meeting diminished prospects for a cut in rates in March, as the FOMC wants to see more confirmation that inflation is moving sustainably toward their 2% core PCE target. While there's anticipation about how and when the Fed will change policy this year, long-term mortgage rates have already retreated significantly from their 22-year highs of last October.
Forecast Recap
When last looked forward in December, it was anticipated that the then-month-long rally for rates had run its course and was due for a partial retracement. However, mortgage rates have been essentially flat. There was a miss in the expected range, with rates declining rather below the anticipated levels.
Interestingly, previous forecasts undershot the actual level of rates, while the most recent one overshot it, indicating a degree of unpredictability in the market.
Factors Affecting Mortgage Rates
Inflation and Fed Policy: Declining inflation and anticipation of the Fed lowering short-term rates have contributed to the decline in mortgage rates since recent peaks.
Technical Factors: Issues with certain banks, concerns of a forthcoming recession, and changes in MBS supply and demand have influenced mortgage rates. Improved MBS demand and declining future risk factors have contributed to the decline in rates.
Government Debt: Changes in the Treasury's issuance of longer-term bonds have also impacted longer-term rates, aiding in the decline of mortgage rates over the past few months.
Forecast Discussion
Presently, it doesn't seem that significantly lower mortgage rates will be coming over the next couple of months. While there's a chance they may move slightly lower, this depends on inflation continuing to trend toward the Fed's target.
Over the next nine weeks, the average offered rate for a conforming 30-year fixed-rate mortgage is expected to run in a range of 6.35% to 6.89%. For a hybrid 5/1 ARM, a range of 5.85% to 6.40% is expected.
While there's uncertainty in the market, the forecast suggests a relatively stable period for mortgage rates over the next two months. Factors such as inflation trends, Fed policy, technical market dynamics, and government debt issuance will continue to influence mortgage rates in the foreseeable future.
Stay tuned for updates and market commentary through our weekly MarketTrends newsletter, and check back to see how this forecast aligns with market movements.
References:
- https://www.hsh.com/2month4cast.html
- https://www.noradarealestate.com/blog/mortgage-interest-rates-forecast/
- https://www.noradarealestate.com/blog/mortgage-rate-predictions-next-week/
- https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/
- https://themortgagereports.com/32667/mortgage-rates-forecast-fha-va-usda-conventional