HSH: Tepid Economic Growth Will Keep Mortgage Rates Stagnate

The latest two-month mortgage rate forecast has┬ájust been released from loan information company HSH.com and after months of bumping along the bottom with record-low rates, the new prediction says – drum roll please – nothing will change. Hmm, not exactly earth-shattering, but good to know anyway.

HSH is forecasting that mortgage interest rates on 30-year conforming fixed rate loans will remain in the range of 3.42 percent to 3.64 percent between now and January 11. During the past two months, the actual range was 3.52 percent to 3.72 percent.

Among the reasons that rates will coast at least until January, one of the top is the Federal Reserve’s continued QE3, its program of buying up $40 billion of mortgage-backed bonds each month to keep interest rates low. The Fed has put no fixed end date on their investments, essentially guaranteeing low rates until the economy recovers, whenever that may be.

Also influencing the forecast is the outlook for GDP, which is predicted to come in around 2 percent for the third quarter, up from the disappointing 1.3 percent in the second quarter. Yet while

“an improving economy will tend to foster higher interest rates,” the forcasters wrote, “it is by no means clear if the Fed will allow them to rise, or, if they do, by how much.”

What’s not affecting rates? Politics.

“Given the present state of the housing and mortgage markets, there will be probably little direct effect from the just-completed elections, at least as far as the forecast period ahead is concerned,” the forecast said.

So, barring any major economic slips, mortgage rates will maintain the status quo for two months. As HSH.com says, “welcome to fairly benign stability.”

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