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Market Update

From the Desk of Jason Obradovich, Chief Investment Officer

Have Rates Hit Their Peak?

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

It’s been 16 years since rates have been this high, whether you are talking about mortgage rates or the 10yr Treasury.  Rates last hit these levels in August of 2007 and there should be real concerns over how much the level of interest rates will have an impact on home buying as well as home building.

The Fed is certainly sticking with its “high for longer” directive on rates and there is growing anticipation on what they will do at the next meeting on September 20th.  With a strong job market and relative sticky inflation this is where the Fed will be challenged to thread the needle in terms of bringing inflation down gently vs damaging the economy.

The recent downgrades of US Treasury debt along with several of the largest banks should be a caution to everyone that the level of rates could be very damaging to the US economy.

The futures market suggests that there is only an 11% change the FOMC raises rates in September and there is still a fair amount of economic data coming out between now and then.  Over the next few weeks we will see Home Prices, Core PCE for Q2, GDP for Q2, jobs data for August, CPI and PPI for August as well as confidence and housing data.

So much can change in terms of market sentiment between now and then and given the fact that the Fed is near the height on rates, you should expect a lot of market volatility between those that believe the Fed should keep raising rates, those that believe the Fed should level off and those that think the Fed should be lowering rates.

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

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