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Freddie Mac revises forecast downward for mortgage rates, home sales

Chron logo Chron 8/1/2019 R.A. Schuetz, Houston Chronice

Mortgage rates are around a two-year low, and Freddie Mac predicts they'll stay that way through 2020.

The mortgage-finance company recently revised its forecast for the average 30-year fixed-rate mortgage in 2020 to 4 percent, down from the 4.5 percent it had predicted as recently as April.

Mortgage rates are tied to investor confidence -- when the market is shaky, investors tend to move their money out of equities into the relative security of debt, and the competition to buy mortgages drives rates down.

MORTGAGES: Amid economic uncertainty, mortgages a glimmer

But while economists say that lower mortgage rates will spur home sales, Freddie Mac revised its home sales forecast downward. Its prediction is that year-over-year GDP growth and home appreciation will continue to slow -- and that while home sales will continue to increase, it will not be as much as previously thought.

On Wednesday, the Fed also showed it was concerned about the country's economic outlook when it cut its rate by a quarter of a point, the first rate cut in a decade.

"Last week's announcement of a slowing economic output, coupled with yesterday's Fed rate cut overshadowed rising consumer confidence and strong contract signings," said George Raitu, an economist for realtor.com, in an emailed statement.

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