US MORTGAGE RATES

The updated forecast of US mortgage rates published by the Mortgage Bankers Association (MBA) on August 17 2009, maintains the rising mortgage rate outlook of the July forecast, but a considerably lower increase is predicted for 2009.

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MBA' s previous mortgage rate forecast predicted that the steepest increases, amounting to 70 basis points would take place in the second half of 2009. However, the August 2009 update predicts mortgage rates rising by only 30 basis points by the end of the fourth quarter of 2009. The steepest mortgage rate increase is predicted to take place in the second half of 2010 when rates are predicted to rise by 40 basis points.

More specifically, MBA predicts that US mortgage rates will increase from 5.0% in the second quarter of 2009 to 5.3% in the fourth quarter of 2009 and to 5.7% by the end of the second quarter of 2010. Mortgage rate are predicted to rise an additional 20 basis points in the second half of 2010 reaching 5.9%.

MBA predicts that mortgage rates will continue rising in 2011 and reach 6.2% by the end of the year. Overall, between the second quarter of 2009 and the third quarter of 2011, the US mortgage rate is predicted to increase by 120 basis points. In terms of yearly averages, US mortgage rates are expected to average 5.2% in 2009, 5.8% in 2010 and 6.1% in 2011.

Source: Mortgage Bankers Association

The 10-year Treasury yield, which stood at 3.3% as of the second quarter of 2009 is predicted to increase by 60 basis points to 3.9% by the end of the year. An increase of an additional 50 basis points is predicted in 2o10 that will bring it up to 4.4% by the end of the fourth quarter. The 10-year Treasury yield is expected to continue rising in 2011 by an additional 20 basis points to reach 4.6%. In terms of yearly averages, is predicted to average 3.4% in 2009, 4.3% in 2010 and 4.6% in 2011.

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Outlook for US Mortgage Rates August 2009