Where will mortgage rates go in the next 1-2 years?

[Anonymous]

Anonymous wrote:I'm at 5.3% on a 30 year/7 year ARM construction to perm. Wish we could have gone 10 but rates were half a percent more. Figures 7 years is a good enough time to see what happens. Even if it went down to the low 4s we'd consider refinancing at that point.

Dream on. It won’t.

[Anonymous]

I think they will be high for a while. We just canceled a reno project. I don't feel good about spending the cash right now and our HELOC % is too high these days.

We thought about moving, but I think we will stay put for at least the next 4-5 years.

[Anonymous]

Anonymous wrote:I think they will be high for a while. We just canceled a reno project. I don't feel good about spending the cash right now and our HELOC % is too high these days.

We thought about moving, but I think we will stay put for at least the next 4-5 years.

and this is the goal of Jerome Powell.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We need to move for schools in the next 1-2 years (private is not an option, in bound school is a disaster). We can reasonably afford our target suburban areas at 5-6.5% rates, but will be stretched if rates go higher than that. Do you think rates will stay at 7% or higher?

If you own right now and have a great interest rate, rent it out and find a rental to live in, in your ideal neighborhood.

This. What’s wrong with renting?

[Anonymous]

if anyone KNEW this, they'd be a very good rates trader and worth a gajillion dollars. No one knows. Everyone guesses.

the "mortgage rate" for conforming mortgages is a combination of a few things

1) the prevailing ~10 year treasury rate.
2) the spread above the 10 year rate at which mortgage backed securities trade

Both 1 and 2 are not predictable with any kind of precision. anyone who tells you they KNOW is overconfident.

So what would be my best guess over the next 1-2 years? I don't know, but we can tell what "the market" is predicting. I'm not 100% sure I'm looking at the right thing, but the 10 yr 2yr forward starting swap (ie the market's prediction of where the 10 yr swap rate, which is closely related to the 10 yr treasury rate, will be in 2 years) is approximately 4.3%. For context the 10 year swap rate now is 3.9%. So the market is saying that intermediate term risk free rates will likely rise by approximately 0.4% over the next 2 years.

So that leaves mortgage spreads. Right now they're historically high, as the Fed has stopped subsidizing mortgage spreads (they stopped buying mortgage backed securities). I'm not gonig to spend time on it or make a prediction, but I'll just say that if I had to GUESS, mortgage spreads MAY come in a little bit (this is a complex topic) from their historically high levels.

So I'd probably say the base case is something like "about where they are now" with 10 yr rates going up and mortgage spreads coming down.

But this all depends on a million unpredicatable things. Many highly intelligent hard working people who do this for a living will get it wrong.

So just do what makes sense with the information you have. Don't try to predict rates.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm at 5.3% on a 30 year/7 year ARM construction to perm. Wish we could have gone 10 but rates were half a percent more. Figures 7 years is a good enough time to see what happens. Even if it went down to the low 4s we'd consider refinancing at that point.

Dream on. It won’t.

NP: you don't know this. No one knows.

[Anonymous]

I'm way too nervous to do an ARM -- it's entirely possible that rates could stay in the 6-10% range for the next 10-20 years -- that's where they were from the 70s-90s while inflation was rampant for at least two decades!

[Anonymous]

Anonymous wrote:I'm way too nervous to do an ARM -- it's entirely possible that rates could stay in the 6-10% range for the next 10-20 years -- that's where they were from the 70s-90s while inflation was rampant for at least two decades!

Inflation was not rampant for two decades.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm way too nervous to do an ARM -- it's entirely possible that rates could stay in the 6-10% range for the next 10-20 years -- that's where they were from the 70s-90s while inflation was rampant for at least two decades!

Inflation was not rampant for two decades.

Mortgage rates we above 7% from 1972-1992. With runaway inflation in the 70s leading to rates in the teens in the late 70s early 80s.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm way too nervous to do an ARM -- it's entirely possible that rates could stay in the 6-10% range for the next 10-20 years -- that's where they were from the 70s-90s while inflation was rampant for at least two decades!

Inflation was not rampant for two decades.

Mortgage rates we above 7% from 1972-1992. With runaway inflation in the 70s leading to rates in the teens in the late 70s early 80s.

Inflation was rampant for like 3-4 years before Volcker tamed it, not 2 decades.

Yes, rates were elevated for 2+ decades because it takes a long time to come down from 17% Fed funds rate. You can go from 17% to 4% in the course of 18 months.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm way too nervous to do an ARM -- it's entirely possible that rates could stay in the 6-10% range for the next 10-20 years -- that's where they were from the 70s-90s while inflation was rampant for at least two decades!

Inflation was not rampant for two decades.

Mortgage rates we above 7% from 1972-1992. With runaway inflation in the 70s leading to rates in the teens in the late 70s early 80s.

Inflation was rampant for like 3-4 years before Volcker tamed it, not 2 decades.

Yes, rates were elevated for 2+ decades because it takes a long time to come down from 17% Fed funds rate. You can go from 17% to 4% in the course of 18 months.

You can’t*

[Anonymous]

Anonymous wrote:

Anonymous wrote:If 2 million are unemployed like Powell hopes rates will be in the 1-3% range.

No way. Not for another 50-100 years.

What do you think happens when 2 million people (or more) are unemployed due to the current moves by Powell? We will see relief (increased unemployment/stimulation checks/etc.) from congress similar to the pandemic and lowered interest rates. Guaranteed.

[Anonymous]

Anonymous wrote:if anyone KNEW this, they'd be a very good rates trader and worth a gajillion dollars. No one knows. Everyone guesses.

the "mortgage rate" for conforming mortgages is a combination of a few things

1) the prevailing ~10 year treasury rate.
2) the spread above the 10 year rate at which mortgage backed securities trade

Both 1 and 2 are not predictable with any kind of precision. anyone who tells you they KNOW is overconfident.

So what would be my best guess over the next 1-2 years? I don't know, but we can tell what "the market" is predicting. I'm not 100% sure I'm looking at the right thing, but the 10 yr 2yr forward starting swap (ie the market's prediction of where the 10 yr swap rate, which is closely related to the 10 yr treasury rate, will be in 2 years) is approximately 4.3%. For context the 10 year swap rate now is 3.9%. So the market is saying that intermediate term risk free rates will likely rise by approximately 0.4% over the next 2 years.

So that leaves mortgage spreads. Right now they're historically high, as the Fed has stopped subsidizing mortgage spreads (they stopped buying mortgage backed securities). I'm not gonig to spend time on it or make a prediction, but I'll just say that if I had to GUESS, mortgage spreads MAY come in a little bit (this is a complex topic) from their historically high levels.

So I'd probably say the base case is something like "about where they are now" with 10 yr rates going up and mortgage spreads coming down.

But this all depends on a million unpredicatable things. Many highly intelligent hard working people who do this for a living will get it wrong.

So just do what makes sense with the information you have. Don't try to predict rates.

Thanks for nothing!

[Anonymous]

you're welcome. If you want to hedge a big rise in mortgage rates, I guess you could buy puts on ETF's that own 10 yr treasuries or mortgage backed securities.

I doubt you want to do that though, which displays the pointlessness of speculating on near term rate moves.

[Anonymous]

To the window, to the wall. Until the rates drop down the markets gonna fall. Aww skeet skeet mother fudger, aww skeet skeet gah damn.