Contrary to 2009 predictions, mortgage loan rates far below 6%
May 2011 19

At the end of 2009, several widely-respected economists (I almost wrote ‘communists’) predicted that the average 30-year fixed mortgage loan would rise from its rate then, 5%, up to 6%, by the end of 2010.

This never came to pass.

It’s expected that this week’s Freddie Mac national survey of mortgage loans will show a rate at around 4.53%, almost a full point and a half under six percent.

From a Washington Post article:

… Amy Crews Cutts, deputy chief economist at Freddie Mac, said interest rates are bound to rise to 6 percent by the end of 2010 because private buyers will demand a higher rate of return on the securities than the Fed did. Lenders may have to raise the rates they charge to consumers in order to make that happen.

From a CNBC story:

“If you told me by the end of 2010 a 30-year rate was at 6 percent, that sounds about right,” says Mark Zandi, chief economist at Moody’s. “I don’t think there’s any question rates are headed up.”

This is pretty interesting. The lower rate is undoubtedly good for buyers and those who are refinancing purchases of home loans.

On the other side, however, it reflects continued weakness in the general economy. Rates are being kept low because the US federal government has continued to buy up mortgage debt on the open market. It wouldn’t be doing this if it felt the economy could stand on its own.

If you asked those same economists what they would predict for the next year to 18 months, I bet they’d say again that interest rates will rise.

As I did last time, this time I agree with them!

Leave a Comment