Goldman Sachs: Mortgage interest rates will rise to 5.5% by 2019

The most recent data from Freddie Mac shows that the average interest rate for a 30-year, fixed-rate mortgage is around 4.15%, but interest rates are going to increase by a significant margin over the next few years, analysts from Goldman Sachs said in a new report.

The report, recapped by Reuters, shows that Goldman Sachs’ analysts are predicting that the 30-year mortgage rate will rise to 5.5% by 2019, representing an increase of roughly 150 basis points, or 1.5%, over the next couple of years.

The analysts cite the potential for Fannie Mae and Freddie Mac reform as a reason for the expected increase, noting that previous housing finance reform legislation may be used as a guide for future reforms.

From the Reuters report:

If mortgage finance reform undergoes the changes similar to the Johnson-Crapo plan, mortgage rates may climb 50 basis points due to higher costs to compensate private sector guarantors for the loans.

“Costs would also need to rise in order to pay the proposed explicit government reinsurance fee, a backstop which today is unpriced,” Young and Phillips said.

For the full story from Reuters, click here or below.

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