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Freddie Chief Economist ‘Pretty Certain’ 30-Year Fixed Mortgage Rates Will Hit 5% by Mid-2014


During the latest radio interview with Real Estate Today Radio, Freddie Mac Vice President and Chief Economist Frank Nothaft weighed in on the direction of mortgage rates, as he normally does for his own company.

While he typically speaks about rates in the past tense, host Gil Gross pressed him to make a prediction about where mortgage rates might be headed in the near future, in an edition fittingly titled, “The Five Percent Show.”

Specifically, he asked Nothaft if mortgage rates would hit five percent, a seemingly important psychological threshold, and if so, when.

Here’s what Nothaft said, after joking that it’d be a lot easier to simply answer the first part of the question, and not so much the when part:

I don’t believe it will be this year. But I do feel pretty certain that it will be sometime in 2014. So if you were to try to pin me down, I would say by the middle of 2014 we will already see 30-year fixed rate mortgage rates up around five percent.

Nothaft sounded pretty confident that long-term fixed mortgage rates would make their way up to 5% by next year, though he did hold out hope for the rest of 2013.

Even if they do rise to 5%, it would mean less than a half a percentage point (0.43%) increase from current levels, which certainly isn’t the end of the world given how low rates are.

However, it’s important to note that 30-year fixed mortgage rates haven’t averaged more than 5% since April of 2010.  On a $300,000 mortgage, the difference in monthly payment would be about $100.

Nothaft’s sentiment echoed that of Fannie Mae chief economist Doug Duncan, who cautioned back in June that mortgage rates wouldn’t come back down.

But Could Mortgage Rates Actually Fall Again?

Despite most pundits taking the safe route and betting on higher rates, one website that tracks mortgage rates actually forecasts them to drop fairly significantly.

The website tracks Freddie Mac’s rates using what they say is independent, objective, and global data, which relies on a “long-range economic dataset” to generate forecasts using artificial intelligence.  Got all that?

Their latest forecast for 30-year fixed rates puts them at 4.02% in February 2014, down about a half-point from current levels.

And in the preceding months, rates are forecast to slowly trickle down from current levels throughout the rest of the year.

I thought this was a bit hard to believe, so I used the Wayback Machine to look at archives of prior predictions on

What I found was a June 1 snapshot that forecast the 30-year fixed to average 3.26% in August and 3.17% in September.

We all know that didn’t happen, not even close. Other forecasts were also kind of off as well. But if it were that easy to predict the future, the world would be a very different place.

So is Nothaft smarter than the computer? I guess we’ll have to wait and see.

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