One of the things I track is larger monetary policy and how it relates to the economy. This drives real estate, as well as many other things. This includes mortgage interest rates forecast 2016. In the course of my once a quarter update (disclosure, my work, done for me and my uses. Then shared to all who might find value. PS please share any and all corrections/additions/thoughts. That is how we all learn). I came upon a few things that prompted my to do this Mortgage interest rates forecast 2016.
There are many sources with predictions as to Mortgage interest rates forecast 2016.
One of things that jumped to my attention was the amount of Treasuries on the Federal Reserves Balance sheet.
As of the August 2016 Quarterly Report on Federal Reserve Balance Sheet Developments. The Federal Reserve bank is holding 2.4 Trillion (with a T!) of Treasures. It holds 4.2 Trillion Dollars worth of securities. These Treasuries are held at today’s artificially low interest rates. Due to this exposure. I doubt they can substantively raise rates in the near to medium term due to the effects on their own balance sheet.
Interest Rate in the United States is expected to be 0.75 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Interest Rate in the United States to stand at 0.75 in 12 months time. In the long-term, the United States Fed Funds Rate is projected to trend around 2.25 percent in 2020, according to our econometric models.
While the Fed Fund rate is not exactly the Mortgage Rates. Mortgage rates are dictated mostly by market movements, but the Fed can have a huge influence on rates.
Even though the federal funds rate is not tied to mortgage rates, it affects them indirectly because it impacts lenders’ borrowing costs. It is also important to know that Treasury yields only affect fixed-rated mortgages. The 10-year note affects 15-year conventional loans while the 30-year bond affects 30-year loans. So there is no easy answer. The bigger picture appears they can not significantly raise rates in the near and medium term.
It appears that we have a clear argument as to why the Federal Reserve Bank can not raise interest rates. I will leave the following quotes for historical perspective.
“Prediction is very difficult, especially if it’s about the future.”
–Nils Bohr, Nobel laureate in Physics
“Some things are so unexpected that no one is prepared for them. “
–Leo Rosten in Rome Wasn’t Burned in a Day
“Forecasting is the art of saying what will happen, and then explaining why it didn’t! “
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