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In the face of market and geopolitical uncertainties, fixed 30-year mortgage rates have seen a five-week surge to 7.57%, a level not witnessed since late 2000, as reported by Sam Khater, Freddie Mac’s chief economist on Thursday. Freddie Mac, with a market cap of 2020M USD and a P/E ratio of 74.58, according to InvestingPro data, has been experiencing a significant return over the last week and a strong return over the last three months, as per InvestingPro Tips.
The recent uptick in mortgage rates has been less discouraging for certain groups of buyers, including those previously edged out during pandemic competition and those relocating from high-cost areas to more affordable ones. Interestingly, Freddie Mac, which has high earnings quality with free cash flow exceeding net income, is expected to grow its net income this year.
This rise in rates has led to an increased interest in adjustable-rate mortgages (ARMs), especially 5/1 ARMs. Bob Broeksmit, president of the Mortgage Bankers Association, noted a 15% increase in applications for ARMs. This trend has contributed to an overall rise in mortgage applications despite the higher costs associated with the current rate environment. It’s worth noting that Freddie Mac, whose stock generally trades with high price volatility, has seen a large price uptick over the last six months.
As per trade group data, the 30-year fixed mortgage rate currently stands at 7.67%. This comes after the release of September inflation data which has added further pressure on mortgage rates. Freddie Mac, whose liquid assets exceed short-term obligations, has been profitable over the last twelve months, according to InvestingPro Tips.
Looking forward, Lawrence Yun of the National Association of Realtors predicts that mortgage rates could hit 8% by year-end due to rising 10-year Treasury yields. This forecast was communicated by Shaina Mishkin, indicating that the current trend of increasing mortgage rates may continue in the near term. Analysts predict that Freddie Mac will continue to be profitable this year, despite the rising rates. For more insights like these, consider checking out InvestingPro which offers a plethora of additional tips.
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