Mortgage Rates to Average 6% by End of 2010

The latest monthly Housing and Mortgage Market Review from the PMI Group projects a gradual rise in mortgage rates, averaging 6% by the end of 2010. Uncertainties surrounding the end of the Federal Reserve’s mortgage-backed securities purchase program may affect the projection.

January 19, 2010

The latest monthly Housing and Mortgage Market Review from the PMI Group projects a gradual rise in mortgage rates, averaging 6% by the end of 2010. Uncertainties surrounding the end of the Federal Reserve’s mortgage-backed securities purchase program may affect the projection.

A decline in home sales over the next several months is expected, followed by growth, thanks to a new credit and continued expansion of the economy, especially as the job market begins to expand.

- PMI projects a 7.7% increase in existing sales and a 35.5% increase in new home sales in 2010.
- The oversupply of housing inventory caused prices to decrease 12.7% in 2009.
- This year, prices will fall an additional 5% by the spring.
- Stronger sales and reduced inventory to bring prices back to 2009 levels and remain unchanged by year’s end.

Recent projections by Freddie Mac’s chief economist include little change in short-term interest rates during 2010, before rising significantly in 2011. Longer-term rates are projected to move modestly upward over the year.

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