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Mortgage rates fall as an economist waves the white flag


A house in a suburb of San Diego

Housing loan rates plummeted, another reminder of the "lower for longer" conditions that have weighed on financial markets since the 2008 financial crisis.

The 30-year period Freddie Mac said on Thursday the fixed-rate mortgage averaged 4.1

4% in the 2nd week of May. That had dropped 6 basis points during the week. The popular product was boosted for four weeks, the first time since September of last year that it had seen so much growth.

The 15-year fixed rate mortgage averaged 3.60% after 3.64%. The five-year Treasury indexed variable rate hybrid mortgage averaged 3.68%, down 9 basis points.

These interest rates do not include any fees associated with obtaining mortgage loans.

Fixed income mortgages follow the development of the benchmark 10-year US Treasury note

TMUBMUSD10Y, + 1.65%

. Yields on them and other bonds fell early in the year after the US Federal Reserve surprised investors, pointing out that the reasons for interest rate hikes had "weakened" due to weak inflation, weaker growth and political uncertainty.

Then, government bonds fell again in March as fears of slow global growth pushed investors into safe havens. Bond yields fall with the price rise.

Related: Mortgage rates drop at the fastest pace of a decade as fears of growth flare up

Freddie Mac's chief economist Sam Khater agreed to participate in MarketWatch's forecasts for mortgage rates published last December. Like many analysts, Khater also expected that after years of post-crisis cleanup and unusual one-off events, such as political turmoil in 2016 and changes in tax laws in 2019, financial markets would be "normal" again in 2017.

But earlier in this Khater threw in the towel and cut his interest rate forecast. He now expects the 30-year fixed-rate mortgage to average 4.30% on the year, compared to its previous forecast of 5.1% – and also to the average of 4.54% in 2018.

In an interview, Khater MarketWatch stated that this was the case. His low gaze is hard to bear with the nagging sense that we are not at the end of the current economic expansion, as many experts have believed for some time, but closer to the Lie in the middle and have room to walk.

Between a strong consumer sector, healthy corporate balance sheets, market indicators like the yield curve, which usually point in the right direction, and a supportive policy: "When you put everything together, that looks good," Khater said.

See: With mortgage rates near 14-month lows, what is a yield curve?

"This was the least favored economic expansion and the bull market," Khater added. "Due to the negative headlines, it sometimes overshadows our ability to view the data. I think the ghosts of the Great Recession remain in our thoughts. We are overcautious and constantly searching for what will ruin this thing. "

Despite all this, the official Freddie forecast does not foresee any Fed rate hikes (2019 or 2020), which is furthest out. Khater and his team predicted.

The Fed kept interest rates stable on Wednesday and did not indicate that it was urgent to shift interest rates both ways.

Read : The Fed keeps interest rates stable as the economy sticks with & # 39; fixed interest rate & # 39; growing and inflation remains low

(Economists at Freddie's sister company Fannie Mae predict a rate hike for 2019, but have not looked ahead by 2020)

Related: Americans still shy away from shifting Interest rates 10 years after the crisis

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