Fannie Mae sees faster rate hikes

The mortgage giant Fannie Mae recently moved it’s projected timeline for additional Fed rate hikes by several months.  The mortgage companies ESR group is using the a main tool of the Fed, a measure of inflation – the PCE deflator which is 2.1% higher when compared to last year.  Not surprisingly this is the first time in over 5 years it came in above the Fed’s 2.00% target.

Fannie Mae Rate Hikes Fed

Fannie Mae sees faster rate hikes from the Fed

Another factor – unemployment, which is running below 5.00%.  The ESR group believes that the economy has seen added pressure to inflation and thus the Fed will raise rates in June 2017 and September 2017.  What will happen to mortgage rates?  Hard to say but keep in mind we seen mortgage rates move down recently despite the Fed raising their rates and the pressure of future rate hikes.

The Fed also may start shrinking it’s balance sheet of mortgage bonds (Mortgage Backed Securities) which in the past caused a massive amount of fear in the market.  Over time bond traders have become less “fearful” of a shrinking balance sheet by the Fed.  Additional pressure on the Fed is coming from home sales, pending sales, and mortgage applications which are generally up despite the recent rise in rates.  Keep in mind though; the move higher in rates from November to January may not show up in real economic numbers until Q2 2017.