Jason: Hello, everyone. Welcome back to the Mortgage Rundown. Today we're going to talk about what's happening with interest rates. Since our last update, we've seen interest rates continue to rise and they've been rising very steadily since September of last year.
The question I get asked most often is when is this going to stop? The problem we are dealing with today is that the Federal Reserve didn't take the necessary steps last year to combat inflation, and now they are playing catch up as inflation hits 40-year highs. So, what the Fed needs to do after under correcting for at least a good solid year, they now need to overcorrect to slow price inflation down.
The other problem is if the supply chain is disrupted and the labor market is full, so a few rate moves by the Fed isn't likely going to do very much to slow inflation down. They will need to make some pretty drastic steps over a longer period of time to get prices under control. That means interest rates are likely to remain elevated for some time. That's the bad news.
The good news potentially is that the market has already priced this in and the rates you see today reflect a lot of future Fed moves. The market is expecting the Fed to raise 50 bips at the next meeting next week, another 50 bips in June, another 50 bips in July. And then it starts to level off somewhat, but still increase in September, November, and December.
So, what will happen to mortgage rates for the rest of 2022? Our best guess is that they will be somewhat around the levels we see today, but still very possibly that they go up a tad from here.
Rates in the 5% range are the new normal in today's market. And until we see the supply chain catch up with demand and excess in the labor market, we won't see rates move back down.
That's it everyone from the capital markets desk this week. Thank you all for watching and have a great day.