Mortgage rates going up. Is the market expecting inflation?

[Marcus Auerbach]

Rates are supposed to go down. All the major forecasts for mortgage rates are still pointing slightly down for 2025. But ever morning for the last 2 weeks I see the 10 year T-bill up another 10 basis points or so, and the mortgage market is following suite. This time of the year we are talking about strategy and goals for our REI for next year and frankly, I am not sure where to go from here.

The last forecasts I have seen from major banks and the MBA are still expecting rates in the 5.9%-ish range for spring 2025 (Q2) and that does not make any sense to me given what I see. Even more interesting is the yield curve, which currently seems to be in the process of un-inverting (?) with an interesting U-shape, but short-term money is still more expensive than long-term (https://www.ustreasuryyieldcurve.com) . 

Are the markets pricing in an expectation of inflation? M2 has not come down much since it's post-COVID peak and national debt as a percentage of GDP is at a record high.

[Chris Seveney]

@Zach Wain

We also need to be careful what we wish for. Our over inflated government is driven by way too many jobs. Once they cut the govt spending that is going to equate to negative job growth most likely for periods of time. This will put downward pressure on mortgage rates and housing pricing.

It’s necessary but it’s going to be painful for many