My Loan Officer
  • Loading...
Jason Obradovich - Chief Investment Officer

30 Year Fixed – 4.875% / 5.075% APR   15 Year Fixed – 4.500 /4.843% APR   FHA 30 Year Fixed – 4.250% / 5.249% APR   VA 30 Year Fixed – 4.250% / 4.848% APR

Rates are current as of 9:00AM PST on 8/11/2022 | View Disclosures

Housing Market News & Updates

Translating the complexity of the markets into a concise and easy to digest format. Watch videos, read blogs, and view key data on short and medium term trends impacting interest rates, so you can make the right decision for your situation.

Latest Market Update

A Total Reversal By The Fed?

Hello everyone.  Welcome back to the Mortgage Rundown.  Today we are going to talk about what’s happening with the Federal Reserve.

If you were somewhat confused by the sudden drop in interest rates this past week after the Fed raised their benchmark rate, you are not alone. The FOMC somewhat shocked the world last week, not because they raised interest rates by 75bps in the last meeting, but it was their language that caused a sudden drop in long-term rates and a large stock market rally.

As you can see from the chart below, the 10yr Treasury has been coming down since its peak in mid-June and then dropped much further last week. The FOMC’s language last week indicated that the benchmark rate was at its neutral level, which is the level the Fed expects it to be at in the long run.  They also indicated that they would do what was necessary to prevent a recession. 

That was very confusing to the market who interpreted this as a policy shift from the Fed, from raising rates to a sudden possibility that they could be lowering rates very soon. Now, thankfully over the course of the past couple of days, the Fed has clarified that they expect to continue to battle inflation, which is the greater threat, with the expectation that the Fed lowers rates 50bps in September, followed by another 25bps in November and December.

What is interesting is that the market is pricing in the FOMC lowering rates sometime around July to September of 2023. The market is very concerned about inflation in the very short term, but also very concerned about growth in the medium to long term. 

Also, something to keep in mind is that 75bps rate hikes by the FOMC are not very common historically.  The last time they raised rates 75bps in a single meeting was almost 30 years ago. The Fed tries to direct the market when they expect to raise 25bps, and this year we have had a 25bps move, a 50bps move, and two 75bps moves. 

Why the market thinks the Fed was shifting gears at the same time they were making record rate moves is beyond me, but as the Fed starts to move away from these huge hikes, we should expect more market volatility.

That’s it everyone from the capital markets desk this week. Thank you all for watching and have a great day.

 

 

 

Previous Market Update

Where Are Rates Headed?

 

Hello everyone. Welcome back to the Mortgage Rundown. Today we are going to talk about what’s happening with interest rates. 

So far this year we have seen the Federal Reserve raise interest rates three times: 25bps in March, 50bps in May, and 75bps in June with a strong possibility that they raise them 75bps again in July and 50bps in September.

With all this action by the Fed, it begs the question, how high will mortgage rates actually go?

It’s important to remember that the Fed is making these moves to combat record inflation without harming the economy and causing a recession.  At least that is what they have indicated to the market, that they will be successful in threading this needle.

But can the Fed thread this needle when inflation is so high and they are slamming the brakes so quickly?  My belief is that the Federal Reserve will contain inflation, will slow the economy down, but we will see fragments of recession for certain industries, if not most industries for a period of time.  I don’t think it’s possible the Fed can thread a needle with such a large and diverse economy and their only tool so far is raising interest rates quickly.

Moving back to interest rates, it appears they have started to level off and we’ve seen mortgage and treasury rates get some relief after hitting recent highs. If the Fed can contain inflation and not cause a recession, then rates might hold here or move slightly up. If they, however, hit the brakes too hard and recessionary fears plague the market, then we could see rate come down somewhat.

And one final thought: we shouldn’t be too fearful about the direction of mortgage rates. In my opinion there is no normal level of interest rates and it’s important to remember that interest rates have been on a 40-year trend of going down. Economic growth in a highly advanced economy needs lower rates for sustained growth, especially with a legislature so divided.

That’s it everyone from the capital markets desk this week. Thank you all for watching and have a great day.

 

 

 

More Market Updates

How low will your payment be?