Fannie Mae anticipates higher mortgage rates in 2019

The Fannie Mae Economic and Strategic Research (ESR) Group forecasted that mortgage rates would continue to rise in the remaining quarters this year due to the US-China trade dispute.

The US rate for a 30-year fixed-rate mortgage will likely average 4.2% in the rest of the year, up from the 4.1%, Fannie Mae predicted in April.

“Residential fixed investment may have dragged on growth for the fifth consecutive quarter, but we remain optimistic that the spring home-buying season will be a productive one,” said Fannie Mae Chief Economist Doug Duncan. “We revised upward our 2019 purchase and refinance mortgage origination forecasts amid continued strong demand and a boost to entry-level inventory, the pullback in mortgage rates, and slowing home price appreciation.”

The ESR Group also projected the US GDP growth to climb 2.3%, one-tenth higher than its previous forecast. Net exports were the biggest contributor to quarterly growth, according to the group’s outlook. However, imports dropped as exports rose -- indicating a weakening domestic demand.

“On the heels of a strong first quarter, we upgraded our full-year 2019 forecast of real GDP growth by one-tenth to 2.3%,” Duncan said. “Prior quarter upticks in net exports and inventories may have fueled the growth, but a deeper dive into the underlying data of each suggests weakness. Escalating trade tensions between the United States and China continue to represent a real downside risk to headline growth, while improving productivity and stronger-than-expected growth out of the Euro Area offer roughly offsetting upside risk. As the Fed continues to preach patience and inflation remains well below target levels, we revised our forecast in May to reflect our expectation of zero rate hikes in 2019 and 2020.”