Hello and Happy Wednesday,
Let's dive right in! Rates. Rates. Rates.
The Freddie Mac fixed rate for a 30-year loan increased for the fifth consecutive week, with a 5 basis point jump to 4.72%, following the surge in the 10-year Treasury, which crossed the 2.6% threshold this week, the highest level in four years. Investors are digesting this week’s remarks by a number of Federal Reserve presidents which echo Chairman Powell’s stated concerns that inflation is on an aggressive path that threatens to derail the economy by cutting consumer spending.
The Fed is using forward guidance to inform markets that the bank will take a much harder turn in its monetary tightening to stem what it implicitly acknowledges is a case of runaway inflation. After spending the better part of 2021 downplaying inflation concerns as “transitory,” the Fed finds itself behind the eight ball, needing to unwind an unprecedented quantitative easing platform. For lenders and mortgage originators, the labor shortage driving strong employment gains combined with rising prices is adding upward pressure on costs leading to higher rates. The bottom line is that mortgage rates are on course to surpass 5%, a level not seen since February 2011, when the typical home in the U.S. was priced at just $166,000 – less than half the price of today’s typical home.
