Mortgage News and Tips

Last week’s headline inflation figure of 9.1% was alarming, though core inflation (excluding food and energy) was slightly lower than in the previous month. However, since inflation remains well above the Fed’s 2.0% target, they will be compelled to increase the Fed funds rate by at least 0.75% at their next meeting on Wednesday, July 27th. Some investors feared a 1.00% rate hike would be warranted, but Fed officials last Friday said that was likely unnecessary. While mortgage rates dropped last week due to the news, mortgage rates went up slightly this week as we get closer to the Fed meeting next week.

Ask an expert

With the current uncertainty in the market, one of our best lending partners is frequently asked about his thoughts on rates and where they might be heading. Below are some of the most common questions and responses:

Where are rates heading?
Rates are currently lower than they were 2-3 weeks ago. Barring any inflation surprises, mortgage rates may remain in a narrow range.

What will be the impact of the Fed’s rate increase?
The market is currently anticipating a 0.75% increase at the end of July and another 0.50% increase in September. These increases are already “baked into” current mortgage rates, except for the Prime rate. The Prime rate is used for home equity loans and will increase in lock-step with Fed changes.

How will a recession impact mortgage rates?
Recessions tend to result in lower interest rates. Below is a chart from Freddie Mac, which shows the average rate decline during a recession is 1.8%. (The chart is also a good reminder of how low rates are from a historical perspective.)

Mortgage Rates

Did you know larger loans are currently less expensive than smaller loans? Conforming loans (up to $647,200) are currently approaching 6.0% for 30-Year Fixed, whereas jumbo loans (greater than $647,200) are closer to 5.00% for 30-Year Fixed and as low as 4.0% for ARMs.

How to get the best rate:

• Shop around for a lender

• Ask about their different loan products

• Get pre-approved before offering on property

• Contact us to understand how lending fits into your overall plan on purchasing a home