loanDepot Economist Sees U.S. Mortgage Rates Near 7% in Fourth Quarter

loanDepot Chief Investment Officer and Head Economist Jeff DerGurahian expects U.S. mortgage rates to stay near 7% in the fourth quarter, with stock weakness and higher oil prices shaping his outlook.

In DerGurahian’s view, weaker stocks are drawing buyers back to bonds. He also sees higher oil prices adding to inflation concerns that could lead the Federal Reserve to raise interest rates.

Mortgage rates respond to longer-term borrowing conditions and do not necessarily move with the Fed’s short-term policy rate. A weekly reading put the average 30-year fixed mortgage rate at 7.12% in the week ended Sept. 18, up from 6.97% a week earlier.

The Fed raised its target interest-rate range by 25 basis points to 3.75%-4.00% on Sept. 16. In the September mortgage reading, overall applications fell 1.5% from the prior week, while refinance applications declined 3%. Higher borrowing costs can reduce what prospective buyers can afford and discourage homeowners with lower-rate loans from refinancing.