Weak economic growth in the first quarter did not temper Freddie Mac's projections for the mortgage market for the full year. But there could be mortgage interest rate volatility going forward as the market tries to anticipate what the Federal Reserve will do about short-term rates.
The government-sponsored enterprise lowered its forecast for economic growth in 2015 to 2.3% from a previously anticipated 2.6%.
Despite lagging national economic growth Freddie Mac reports that house price growth in the first quarter beat expectations, and it now expects homes to increase in value 4.5% on the year, a 50-basis-point revision up from last month's economic forecast.
Similarly the GSE's economists have revised up their projections for 2015 total mortgage originations, to $1.35 billion, and refinance share of those originations to 43% in anticipation of the Federal Reserve continuing low interest rates after disappointing gross domestic product numbers for 2015's first quarter.
"For the remainder of this year, we're likely to continue to see these mortgage rate swings as market participants try to anticipate Fed timing around rising short term interest rates," said Len Kiefer, deputy chief economist for Freddie Mac, in a release accompanying the report.
"So far it's been low mortgage rates that have helped to keep homebuyer affordability strong in the face of rising house prices, while income growth remains stagnant."
