Your Mortgage: Market update

Mike Miles

By Mike Miles

If anyone is waiting on interest rates to take a dip … you might be waiting for a while. There are too many indications that things are pointed in the direction of steadily increasing. Don’t panic. This doesn’t mean it’s too late, or that it will be too late, if you haven’t purchased or refinanced a home by now. Mortgage rates are still historically low … just not as low as they used to be. Here’s what is going on.

  • Inflation pressure still exists: It was already expected that the Fed was going to increase rates three times in 2018. There is now a 50/50 chance there will be a fourth increase. This is due to consumer price readings combined with rising oil prices and a falling dollar. The U.S. economy grew at a 2.3 percent pace with inflation edging around 2.0 percent. The economic growth, while considered tepid at 2.3 percent, still beat expectations.
  • Earnings are being reported: This is a big week for first quarter earnings reports with many companies expected to beat estimates. Upbeat earnings reports can have an impact on the marketplace. Increased consumer confidence can affect equities which can affect treasury yields. Mortgage rates follow the 10-year U.S Treasury bond. As that yield increases … so do mortgage rates. It recently eclipsed 3 percent for the first time since late 2013.
  • North Korea is surprising: Foreign policy doesn’t have a direct impact on mortgage rates, but it can certainly contribute to some volatility. We have been used to reading periodically about North Korea threatening us with nuclear weapons. The recent change of pace with peaceful talks removes some potential for volatility. The less spooked investors are generally equals more confidence. An increase in consumer confidence contributes to market stability.

The Mortgage Bankers Associations publicizes a monthly mortgage finance forecast. The most recent release from April 24, 2018 predicts the average rate on a conforming 30-year fixed will be 1 percent higher by the end of 2018 compared to the end of 2017. Again, don’t panic. Rates are still forecasted to be in the 4s for this year. It’s expected we could get into the 5s next year.

The take away from today’s information is to be aware of how things are trending. I think most homeowners and homebuyers have accepted that rates are increasing, but it’s always good to know some of the reasons why.