The U.S. 30-year conventional mortgage rates are expected to rise 150 basis points to approximately 5.5 percent by 2019, according to analysts at Goldman Sachs on Friday. The increase would be in response to investors who want to expand compensation to acquire mortgage-backed securities and an “increase in benchmark Treasury yields,” according to Reuters.
According to the latest Bankrate data released today, the average 30-year fixed-mortgage rate is 4.04 percent, up 10 basis points from last week. A month ago, the average rate on a 30-year fixed mortgage was higher, at 4.07 percent. The average 15-year fixed-mortgage rate is 3.18 percent, up 3 basis points from last week.
The conventional loans mentioned by Goldman Sachs analysts were taken over by Fannie Mae and Freddie Mac in 2008. With much discussion surrounding housing reform and the possible privatization of Fannie Mae and Freddie Mac, many are preparing for the changing housing environment, which may include a potential phase-out of the GSEs.
Senators Tim Johnson and Mike Crapo are proponents of the GSE reform, and over the past four years, have provided numerous bills that will change the course of the regulatory environment for the housing market. One of their proposals, titled the Housing Finance Reform and Taxpayer Act of 2014, focuses on the elimination of Fannie Mae and Freddie Mac by replacing it with another government agency, and will “insure mortgages and issue MBS with private sector entities taking first 10 percent principal losses for each portfolio loans.”
"These proposals varied significantly according to the extent to which the government would still play a role in backstopping mortgage debt," they said.
Marty Young and Alec Phillips, Goldman Sachs analysts, released a joint statement saying that cost will be one of the key factors in the Senators’ proposed bill.
"Costs would also need to rise in order to pay the proposed explicit government reinsurance fee, a backstop which today is unpriced," the analysts said.
Bankrate also reported that the larger jumbo 30-year fixed climbed to 4.34 percent, while the average 15-year fixed mortgage rate rebounded to 3.51 percent. Adjustable mortgage rates also saw an increase, with the 5-year ARM notching higher to 3.51 percent and the 7-year ARM stepping up to 3.73 percent.