Why Fannie Mae’s CEO Says We Must Embrace Today’s Mortgage Rates
“Mortgage rates are shifting, and the projections for 2025 suggest we’re moving toward a more typical landscape.”
By an Industry Insider
Listen up, homebuyers and investors! The days of record-low mortgage rates that we saw during the pandemic are behind us, and understanding the new normal is essential for navigating today’s housing market. A recent statement from the CEO of a leading mortgage enterprise highlights a crucial point: “Don’t expect to see those pandemic lows again.” A blend of monetary measures and extraordinary fiscal policies catapulted rates to all-time lows, but that was a one-time event.
According to recent insights, today’s mortgage rates — and what’s forecasted for 2025 — are right in line with historical trends. Since 1990, the average rate for a 30-year fixed mortgage has been around 6%. Yes, you heard that right! In fact, the average mortgage rate didn’t dip below 5% until early 2009 when the Federal Reserve initiated massive market interventions.
Mortgage rates have a history of fluctuating, often driven by the Federal Reserve’s monetary policy decisions. They remained above 6% for two decades until the Fed started slashing rates in the early 2000s, igniting the first housing bubble. Fast forward to today, and we’re witnessing a different scenario. The Fed is no longer the mortgage market’s safety net. It’s been shedding mortgage-backed securities (MBS) since late 2022, contributing to the spike in mortgage rates we see now.
As of the latest reports, the average rate for a 30-year fixed mortgage sits at 6.69%, a figure that has hovered above 6% since September 2022. This is not just a temporary spike; it’s a return to a more balanced, historical norm following a brief period of unprecedented lows during the pandemic.
So, what does this mean for the average consumer? It means it’s time to recalibrate expectations. The CEO emphasized that current increases in mortgage rates should be viewed as a correction back to historical averages. In light of this, it’s crucial for buyers to adapt to this new environment. Understanding that mortgage rates are influenced by factors like the 10-year Treasury yield is key. Rates are typically higher than Treasury yields due to the additional risks associated with mortgage investments.
As the Fed continues its quantitative tightening (QT) by reducing its holdings of MBS, the spread between mortgage rates and Treasury yields has widened, contributing further to the rise in rates. This pattern suggests that elevated mortgage rates may become the norm, at least for the foreseeable future.
With the Fed’s commitment to letting MBS roll off its balance sheet, buyers need to prepare for a landscape where mortgage rates could remain higher for longer. It’s time to strategize, make informed decisions, and embrace the new realities of the housing market.
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