Peter Schiff Predicts Skyrockerting Mortgage Rates By Year-End — Flags Fed's Impending Balance Sheet Troubles

Peter Schiff, renowned economist, predicts a significant surge in 30-year fixed-rate mortgage rates, predicting a climb to 9% by the end of the year, sparking concerns over the impact on the Federal Reserve’s balance sheet.

What Happened: Schiff warned that rising mortgage interest rates could lead to banks selling their troubled assets (mortgage-backed securities) to the Federal Reserve, potentially causing the central bank’s balance sheet to grow as it tries to manage the situation.

“The 30-year, fixed-rate #mortgage is now 7.9%. Not only will the rate break 8%, but 9% is likely before year end. That will effectively triple mortgage rates, causing the Fed’s balance sheet to explode, as insolvent #banks dump their highly underwater MBS on the #Fed at par,” he posted.

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His comments come amidst growing concerns over rising interest rates. The Federal Reserve’s decision to maintain higher interest rates has led to an increase in yields across all maturity periods. While the rate remained unchanged in the 5.25%-5.50% range during the most recent FOMC meeting, projections suggest a preference for another rate hike in 2023.

Why It Matters: The rising interest rates and yields have stirred market unease. Jamie Dimon, CEO of JPMorgan Chase & Co. JPM, has warned that a rise in Federal Reserve benchmark interest rates to 7% could lead to unprecedented financial stress.

Schiff’s alarming prediction on mortgage rates, if realized, will exacerbate these economic challenges and potentially destabilize the financial system. His concerns over the Federal Reserve’s balance sheet also underline the potential risks associated with the ongoing policy of high government spending, which Schiff has previously criticized for driving inflation and interest rates higher.

Photo Courtesy: Wikimedia Commons

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