Mortgage rate update 12-19-23

Well guys, Christmas came early this year.  Mortgage rates improved significantly last week after the Fed signaled a change in the rate outlook for 2024. Pricing is back to levels last seen in June 2023. 

The dot plot chart we mentioned in last week’s update showed 3 rate cuts in 2024 projected by the Fed. Powell didn’t completely take the need for further rate increases off the table, but he did say that they would now start talking about when to lower rates. This is a new direction from him in his tone.  Just two weeks prior he had said it was premature to talk about easing.

Since that meeting several Fed speakers have come out and tried to walk the markets back a little on rate cut expectations.  Here are some of the comments:

Williams- We aren’t discussing rate cuts yet. Rates are in the right place.

Bostic- Only 2 cuts in 2024 and not till 3rd quarter.

Goolsbee- It’s too early to declare victory on inflation, the market is pricing in more rate cuts than projected.

Mester- The market is a little bit ahead of the Fed’s rate cut view

Daly- had a softer tone than the others.  She said that they had made progress on inflation, and we have to be forward looking that we don’t give people price stability but take away jobs. 

And it will be a balancing act to find the right Fed rate that keeps inflation from rising by overheating the economy, and not keeping it so high that it causes significant job losses and more economic pain than needed.

This Friday we get the Fed’s key measure of inflation-PCE expected in at 3.4%. Its an early close that day for Christmas. We can expect that investors will hedge ahead of this a bit for the long holiday weekend, so pricing could be bumpy for a few days,  but with low activity till after the holidays that’s probably ok.

Look at these rates- in the 5’s for FHA/VA now.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.

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