Market Update - May 1st, 2023
IT’S FED WEEK!!
Key Takeaway: It’s everyone’s favorite time of the month with another highly anticipated Fed meeting! Woohoo! (insert eyeroll)
Expect another volatile week in the mortgage world as the Fed kicks off their meeting on Tuesday followed by Fed Chair Jerome Powell’s press conference on Wednesday. All signs point to another 0.25% increase from the Fed, which would be the 10th consecutive rate increase since March of 2022.
With continued chatter of potential bank failures (First Republic), you may be asking yourself, “Why in the world are they continuing to raise rates?!”. We are not surprised by the probability of another rate hike as Jerome Powell has made it clear that he does not want to risk stopping short of the mark on policy tightening, only to have to start raising rates again if inflation spikes in the near future.
With that being said, we do expect this to be the last rate hike for the foreseeable future. There are too many cracks appearing that are a direct result of the Fed rate hikes within this past year. The rapid increase in rates have put a tremendous amount of stress on the banking sector, which will eventually lead to slower economic growth. This is precisely the outcome the Fed has wanted to cool inflation.
SO WHERE WILL RATES GO FROM HERE?!
Key Takeaway: We can all agree that mortgage rates have been stuck in a sideways pattern for months now. The markets seem to be grasping for some sort or direction as even the slightest report of concern or optimism from the media has the market in a constant state of volatility. However, we believe this might be the month we finally see a clear breakout in the direction of mortgage rates.
“Kreg, are you saying that rates going to increase when the Fed increases rates by 0.25% this week?!” NO! Remember : mortgage rates do not correlate with the Fed. They correlate with inflation. We need to be communicating that this week’s Fed rate hike does not mean mortgage rates are increasing by 0.25%! The exact opposite may end up taking place. There is a strong likelihood that Jerome Powell comes out on Wednesday and indicates that they are done hiking for the near future as economic conditions are pointing towards inflation cooling and the economy weakening. Any indication from the Fed that inflation has been tamed would be a welcome sign to all in the mortgage world. Because remember, mortgage rates will follow inflation!
WHAT’S HAPPENING ON MAY 10th
Key Takeaway: The highly anticipated April CPI inflation report will be released on this date. This report has the potential to have a dramatic impact on the direction of mortgage rates. We are looking forward to this report as we are expecting inflation numbers to tumble. And what happens when inflation drops?! 😊 Stay tuned for Big Nick’s email next Monday for more details on this May 10th report.
Mortgage Hack of the Week – Consolidate Debt with Cash-Out Refinance
This past week alone, we helped two separate borrowers execute a Cash-Out refinance to consolidate debt. This may seem odd for anyone to be refinancing in an environment with rising interest rates. However, one specific borrower was paying 24% interest on a $30k credit card balance and a 9% interest rate on her $40k auto loan! We were able to execute a Cash-Out refinance to payoff both accounts! Yes, she did lose her 4% mortgage rate in return for rate in the mid 6’s. However, she was able to finally breathe a sigh of relief as she was able to free up $1,000 per month and eliminate those high interest accounts! More borrower’s need to be educated on this option as interest rates continue to climb to unprecedented levels on short term debts such credit cards, auto loans, and HELOC’s.
Instagram Posts from Last Week