Amid
expectations
that
the


Federal
Reserve
will
cut
benchmark
interest
rates
in
the
coming
months,
analysts
at
investment
banking
company

Jefferies
anticipate
that

mortgage
rates
could
reach
6.5%
at
the
end
of
2024
and
5.75%
in
2025,
unlocking
$2.7
trillion
in
refinancing
opportunities.

“Recent
economic
data
supports
a
path
toward
rate
cuts
and,
therefore,
a
refinance
rally,”
Jefferies
analysts
Derek
Sommers
and
John
Hecht
wrote
in
a
report
released
Thursday.
“We
estimate
a
‘near-the-money’
pipeline
of
approximately
$2.7
trillion
to
be
refinanced
if
rate
cuts
materialize.”

Soft
inflation
prints
have
made
the
environment
more
favorable
for
rate
cuts.
The
Consumer
Price
Index
(CPI)

declined
by
0.1%
from
May
to
June
while
rising
3%
annually,
the
slowest
growth
rate
in
more
than
three
years.

In
addition,
Fed
Chair
Jerome
Powell
recently
stated
that
policymakers
would
not
wait
for
inflation
to

reach
2%
before
cutting
benchmark
rates,
which
are
currently
ranging
from
5.25%
to
5.5%.

As
a
result,
monetary
policy
watchers
believe
there
is
a
95.3%
chance
of
rates
staying
unchanged
in
July,
along
with
a
98.1%
chance
of
a
rate
cut
in
September,
according
to
the


CME
Group‘s
FedWatch
Tool. 

According
to
Jefferies
analysts,
the
Fed’s
moves
will
bring
mortgage
rates
to
6.5%
at
the
end
of
this
year
and
5.75%
in
2025.
At


HousingWire’s
Mortgage
Rates
Center,
the
30-year
rate
for
conventional
loans
averaged
7.01%
on
Thursday
morning. 

The
analysts
said
mortgage
rates
of
6.5%
will
be
enough
for
refinance
volume
to
increase
during
the
fourth
quarter
of
2024
and
the
first
quarter
of
2025.
That’s
because
lenders
produced
the
$2.7
trillion
in
originations
from
Q4
2022
to
Q2
2024
at
averages
rates
of
6.25%
to
7.75%. 

Therefore,
a
“meaningful
amount”
will
be
eligible
for
a
rate-and-term
refinance
when
30-year

mortgage
rates
revert
to
the
range
of
6%
to
6.5%,
the
analysts
concluded.

The
analysis
incorporates
principal
amortization
and
a
prepayment
assumption
in
projecting
outstanding
vintage
balances.

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