Inflation Analysis by Fannie Mae

According to its Economic and Strategic Research Group’s latest commentary, Fannie Mae, along with projecting that interest rates will continue to rise through the end of 2021, has increased its inflation forecast for 2021. 

In the fourth quarter, they increased their inflation rate forecast to 6.2% annually and expected the rising prices to begin moderating over the next few quarters. 

However, the increase of strong inflation pressure will leave the rates much higher than the Federal Reserve’s 2% target through 2023. 

The Feds are also expected to raise the interest rates in 25-point increments by the fourth quarter of 2022.

“The speed of global supply recovery, the accessibility and cost of labor, and the extent of Federal monetary and fiscal largesse are deciding factors for the forecast.

 To take advantage of the low-interest rates borrowers can consider refinancing their home loans to save money on their monthly payments.

As the Fed sets itself up to be able to raise the federal funds rate the Federal Reserve Chairman Jerome Powell has started considering spreading up the end to its tapering and slowing its asset purchases further.

According to its Fannie Mae mortgage rate anticipate, it projects that because the Fed will commence raising rates in 2022, The average 30-year fixed-rate mortgage will rise and average to 3.3% next year and move up to an average rate of 3.5% in 2023. 

When the mortgage interest rates increase, Fannie Mae feels that the total borrowers looking to refinance will drop and that refinance volumes in the country will hit $2.5 trillion in 2021. 

It also expects the volumes to go down next year and in 2023 to $1.3 trillion and $1.1 trillion, respectively.

According to Fannie Mae, in 2021 the mortgage purchase volume is expected to hit $1.9 trillion before rising by 6.8% to $2 trillion in 2022.