Low Rates as Far as the Eye Can See?

Mortgage rates will remain below 5% for the first half of this year which will help stabilize home sales and keep a refinancing wave going, according to a consensus forecast by banking economists. "A surge of refinancings is already under way and lower home prices and interest rates will gradually support an increase in home sales," said Bruce Kasman, chief economist at JPMorgan Chase. Mr. Kasman is chairman of the American Bankers Association Economic Advisory Committee, which expects the government's efforts to stabilize the financial system and stimulate the economy will lead to a recovery in the second half with gross domestic product rising to 3.8% in the fourth quarter of 2009. However, the bank economists see house prices continuing to fall and mortgage delinquencies rising throughout 2009. The refinancing wave will be "substantial," predicted Mr. Kasman, noting that a high rate of applications may be rejected and cash-out refis will be modest.