Cantor Fitzgerald Predicts 4% Mortgage Rates

by Alex Stenback on July 8, 2005

Carsonkarnak_3 Cantor Fitzgerald Economist and noteworthy market bull John Herrmann dons his well-credentialed turban and gives us the following contrarian take on where interest rates are headed:

"We continue to expect that mortgage rates are headed towards 4.0% over the next three and a half years, and not towards 7.0% over the next three and a half years…"

His top 7 reasons why rates will move lower, inside the envelope on the other side of the link below:

1. Competitive pressures amongst the nation’s lenders
2. Surplus capacity in mortgage lending services sector
3. Innovation in the form of new mortgage products
4. Improved efficiencies in pricing mortgage products
5. Improved ‘duration risk’ pricing models (think 5 year, not 10 year)
6. Moderating Consumer Inflation Pressures
7. 10 year treasury note capped below 4.5%, with a 3.0% recessionary low possible

Essentially what Mr. Hermann is getting at here is that competitive pressures, and the resulting efficiencies (such as new, ever more exotic mortgage products, better "early payoff" predictions, etc.) that are likely to emerge will drive rates lower.  If he’s right, this real estate market may have A LOT more steam left.

While we’d be thrilled if this happened, and you should be too, it’s worth noting that your mileage will vary greatly with any sort of long term interest rate predictions – they mostly turn out to be wrong.  So don’t run down to your lender’s office and take out an option ARM, OK?
· Top Seven Reasons for Lower Mortgage Rates [the Big Picture]

{ 4 comments… read them below or add one }

Kelly July 8, 2005 at 3:07 pm

Where is Curb Appeal? I have not seen it in the last two weeks. I look forward to it every Friday!!

BJ July 12, 2005 at 6:09 pm

here’s the ultimate proof that bubble chatter is really “worth” something:

http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&category=11153&item=5789103222&rd=1&ssPageName=WDVW

Paul July 13, 2005 at 9:57 am

It isn’t worth anything until there is a bid on it… No buyer = no value.

John Gall July 15, 2005 at 2:00 pm

I’d love to see rates below 5 as i’ve got three years left on a 4.25 arm. We’re torn as we like the rate but would sure like to lock in on a very low 30.

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