30-year mortgages expected to rise to 6.4% by late 2005

REAL ESTATE WATCH

April 10, 2005|By Bloomberg News

Freddie Mac has raised its estimate for mortgage rates, saying "inflationary expectations" will keep the average 30-year fixed rate higher than 6 percent for the rest of the year.

That rate probably will average 6.2 percent next year, Freddie Mac said in its latest forecast. A month ago, the McLean, Va., mortgage company, the nation's second largest, predicted a 6 percent average rate.

Mortgage rates are rising as record oil prices are causing concern over higher inflation among investors in mortgage-backed securities, said Frank E. Nothaft, Freddie Mac's chief economist, in a report.

Higher mortgage rates will put a drag on home-price growth as borrowing becomes more expensive, he said.

"We expect to see inflationary expectations feeding into the 30-year, fixed-rate mortgage and as a result push this rate to about 6.4 percent by the fourth quarter," Nothaft said in the report.

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