The Federal Reserve held their July meeting this week. As expected they raised the interest rate by 75 bps which affects the overnight borrowing rate for banks. This also affects credit card and home equity loans. Mortgage rates are affected but most have already priced in the 75 point increase so mortgage rates should not be affected much. Mortgage investors were really listening to see what the Fed said after their meeting. At this point they announced that they are continuing balance sheet reduction and ongoing rate hikes are appropriate. The Fed Chairman did say it will likely be appropriate to slow the pace of increases while they assess how the policy adjustments are affecting the economy and inflation. There are two CPI reports (inflation numbers) and job reports before the next meeting, so there will be several opportunities to see how the interest rate increases have affected the economy.
Pending home sales dropped in June by 8.6%. This was weaker than the 1% decline that was expected and sales are now down 20% year over year. Higher interest rates are impacting home sales as expected.
The Fed is concerned about the inflation numbers as they are much higher than the 2 percent that they like to see inflation at. At this point, it looks like the Fed will raise rates by half point in September and possibly a quarter point in November and December. All of that will be determined by reports coming out in the next few months. They are trying to lower inflation but also avoid a recession. Some say we are already in a recession due to the GDP reports but others say no due to employment numbers. Some feel we will be in a recesssion in a year or two and it should be mild. We’ll see what happens in the future!
For now, we do know that the Fed did what was expected and that should help mortgage rates in the short term. The bond market reacted favorably Wednesday afternoon so that helps. With a little luck, maybe interest rates will come down a bit or at least stabilize for now.
If you are looking to buy a home, it’s still a good time – more homes are coming on the market and interest rates have dropped a bit from their highs this year – so far. Talk to your loan officer and see what you can qualify for, feel free to call me to get a mortgage approval started!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
