This rampant inflation continues to bring more surprises.
To wolf richter for wolf street.
At the Mortgage Bankers Association Annual Convention & Expo in Nashville on Sunday, MBA chief economist Mike Fratantoni predicted that the average interest rate for 30-year fixed mortgages will fall to 5.4% by the end of 2023. And this made some headlines in the news.
in normal monthly weather, the MBA predicted the same: Mortgage rates will drop to 5.4% by the end of 2023. However, mortgage rates, which are currently around 7%, will drop to 6.2% by the end of March 2023 and then continue to decline for the rest of the year until he hits 5.4% at the end of 2023.
But wait… exactly a year ago in October 2021, MBA prediction Average interest rates for 30-year fixed mortgages are expected to be 4% by Q4 2022, which is the current situation. And the current mortgage interest rate is 7%.
It is incomprehensible to the mortgage industry that mortgage rates could actually return to their normal pre-QE levels. And then the wishful thinking begins.
MBA, like many other companies, is predicting a recession in the first half of next year. Or at least the good people out there want a recession by then. Mortgage rates this year have crushed and devastated the business of mortgage banks.
The mortgage industry makes money by issuing mortgages, selling the mortgages to Fannie Mae, Freddie Mac, and other financial institutions, and securitizing the mortgages into MBS. And those revenues collapsed.
There have been mass layoffs across mortgage lenders, with some large ones teetering and some smaller ones already closed or filing for bankruptcy. Shares of the largest mortgage lenders have fallen from highs to 79% (United Wholesale Mortgage), 85% (Rocket Companies, former Quicken Loans, #1 US mortgage lender) and 96% (Loandepot).they are all mine implode stockRead on to learn more about the plight of this industry. Mortgage Lender Issues.
Mortgage refinancing business is down 85% from a year ago to the lowest level since 2000, according to MBA mortgage application data. Withdraw cash and then sell the house as soon as possible.
And the business of taking out mortgages to buy homes is down 35% from its still-glorious, bustling days a year ago.
So pray for a recession, that the recession will force the Fed to cut rates relentlessly, end this dreadful cruelty of QT, start buying MBS, redo QE and lower mortgage rates, inflation tearing the financial markets apart. I hope If your industry is being hit by a collapse in earnings, the economy is a logical thing to pray for.
“The advantage is [recession] The potential for the industry is that it will likely bring rates down a bit,” said Fratantoni. market watch.
“Mortgage rates will fall as the global economy slows, settling at 5.4% by the end of 2023,” said a slide from his presentation.
The average interest rate for a 30-year fixed mortgage is currently 7.29%, according to Mortgage News Daily’s daily readings.Freddie Mac and his MBA weekly readings last week rose to 6.94%, more than double from a year ago.
“With financial market turmoil, increased market volatility, and this global slowdown we are about to experience, we maintain our view that this is the current spike, and we believe that the US recession is likely to continue. Possibilities begin. Subtract this number,” said Fratantoni.
Forget this raging inflation just to save the revenues and profits of this industry?
So, according to the MBA, mortgage rates should drop 1.6 percentage points from around 7% today to 5.4% by the end of 2023.
But a year ago, the MBA allowed wishful thinking to dominate predictions. At the time, inflation was already skyrocketing, and CPI had broken through his 6% line and was climbing straight up. The Fed infamously took a turn and was beginning to take inflation seriously. Also, the MBA is predicting mortgage rates for the fourth quarter of 2022, which he calls 4%.
And this inflation has brought many surprises. While inflation for some goods has receded, inflation is currently spiking in services, much more sticky than goods and very difficult to eliminate. That’s where we do nearly two-thirds of the total. CPI for services surged for the 13th straight month, rising 0.7% in September from August and up 7.4% year-on-year. Worst increase since 1982.
Anyone who predicts anything in this hyperinflationary environment will be led astray by surprises. More can happen. And mortgage rates don’t exist without inflation.
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