“Jenny Don’t Change Your Number!”- Today is National One-Hit-Wonder Day. What is your favorite hit?
After consecutive weeks of moving higher the good news is that mortgage rates did not change last week. Home loan rates continue to hover around the highest levels of the past seven years.
As I noted in last week’s update the Fed is meeting today and tomorrow and is expected to announce a +.25% hike to the Federal Funds rate. Although many media outlets will use the announcement to forecast higher mortgage rates readers of this blog know that the Fed does not directly influence home loan rates (don’t believe me? See HERE).
In fact, I can see a scenario where tomorrow’s announcement could be a catalyst for mortgage rates to reverse lower.
We know that inflationary pressure is the primary nemesis of mortgage rates. This is because when lenders believe the purchasing power of money lent will decline, via inflation, they will charge higher rates of interest to compensate.
The reason the Fed hikes rates is to curb inflationary pressure. Therefore, I will be listening to the comments which accompany the rate hike announcement on Wednesday to hear if they feel like inflationary pressure is building or expected to ease (hopefully the latter).
The Week Ahead
On Thursday we’ll see fresh reports on pending home sales and durable goods orders. On Friday the Fed’s favorite gauge of inflation will be released (personal consumption expenditure price index).
I am shifting to a floating bias.
Current Outlook: floating bias