A Refi wave is years away as mortgage rates settle at 7%

The article, “A refi wave is years away as mortgage rates settle at 7%” by Flavia Furlan Nunes of HousingWire describes the potential outlook of future interest rates.

“…When will the tightening stop? 

Surging mortgage rates reflect the Federal Reserve’s tightening monetary policy to control increasing inflation. The Consumer Price Index released Thursday increased 0.4% in September and 8.2% over the last 12 months, far hotter than expected. 

So far this year, the Fed has increased the federal funds rate by 300 basis points. 

Treasury yields show higher rates in the short term, signaling a recession on the horizon. The 2-year note, closely tied to the Fed’s interest rate moves, increased five bps to 4.28% on Wednesday from the prior week. The 10-year note went from 3.83% to 3.91% in the same period. 

Looking forward, another 125 basis points in federal funds rate hikes are still expected to come in 2022, with the rate topping out well above 4%. After that, analysts are unsure whether rates will remain high or gradually come down.

“If the Fed front-loads rate hikes and then gradually brings rates back down (which we think is the most likely outcome), it will likely be multiple years before rates are low enough to spur meaningful refinance activity,” the KBW analysts’ team wrote.”

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