Fannie Mae lowered its economic growth expectations for the second straight month, according to the mortgage giant’s September 2021 Economic and Housing Outlook commentary.
The decreased 2021 real gross domestic product (GDP) was forecasted, in part, because of a tight labor market and Fannie Mae’s view of COVID-19 Delta variant-induced supply chain disruptions. Its Economic and Strategic Research (ESR) Group is now projecting full-year GDP growth of 5.4%, down from its previous prediction of 6.3%. Additionally, its growth forecast for 2022 was accelerated, projecting 3.8% growth instead of 3.2%.
"Economic growth continues to be held back by supply chain and labor market constraints, both of which we expect to continue well into 2022," said Doug Duncan, Fannie Mae senior vice president and chief economist. "We also expect inflation to remain elevated through much of next year, even if the crest of the recent surge is behind us."
If economic growth slows this year, it could give Americans more time to take advantage of historically low interest rates. Homeowners, for example, who refinance their 30-year mortgage now could potentially save hundreds on their monthly payment. Visit Credible to find your personalized rate from multiple mortgage lenders and start saving money today.
Inflation on the rise, housing market slows
The ESR Group explained that it's concerned about inflation levels, forecasting the Consumer Price Index will end the year at a pace of 5.4% and remain above 5% until the second quarter of 2022.
The housing market could soon slow down due to supply constraints. Current home sales continue to remain strong, but indicators like purchase mortgage applications and pending sales indicate that a slowdown could be in the near future, Fannie Mae forecasted.
"Affordability remains a challenge, even with mortgage rates near historic lows; if the pace of income growth doesn’t keep up with inflation and interest rates rise more than expected, we’d expect housing activity to slow from our current projections," Duncan said.
But while the home purchase market is highly competitive, many homeowners can benefit from taking out a mortgage refinance with a lower annual percentage rate. Low mortgage rates could help borrowers lower their monthly mortgage payments, so check out Credible to compare multiple lenders at once and choose the one with the best rate for you.
Will interest rates increase?
The Federal Reserve is watching key indicators closely such as the labor market and inflation levels in order to determine if it should raise rates. Economists and several members of the Fed are predicting the rates will rise in 2023 – or even as early as 2022.
If the Federal Reserve raises rates, mortgage rates could potentially follow suit. However, if economic growth begins to slow, it could cause the Fed to put its plans for a rate hike on hold.
Homeowners who are interested in refinancing their mortgage should take advantage of low rates now before average rates increase. Currently, Freddie Mac data shows mortgage interest rates are hovering below 3%. Contact Credible to speak to a home loan expert and get all of your questions answered.
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