Weekly Mortgage Rate Update- 04-30-2024
The word being used to describe inflation is- sticky. First quarter GDP showed the economy slowed from 3.4% in the 4th quarter to 1.6% this quarter. That’s a big miss from the 2.5% growth expected, but it is still growth albeit much slower. Normally rates would have improved on this news (slowing economy = better long-term rates) but instead rates rose. This is because the inflation component in GDP was up 3.1% vs 1.6% in the 4th quarter- double last quarter. This caused rates to rise as bond traders hedged ahead of the PCE report due out the following day on Friday. After PCE on Friday, the rates calmed back down a bit when it showed inflation coming in as expected, Core PCE sitting at 2.8%. Still high – but not higher than expected.
Today more sticky news as the quarterly employment cost index rose to 1.2%, higher than expected, the result of higher union and government wages. The Fed pays attention to this as a reliable indicator on wage inflation. Offsetting this strong news on wages though, we had some weak news. Consumer confidence came in much lower than expected and lower than the last reading. Also, regional manufacturing continues to suffer with Chicago PMI showing very strong contraction.
Historically wages trail rents, as a renter its hard to get ahead as your rising wages get absorbed into your shelter costs. This is one reason why homeowners tend to have more personal wealth than renters. When you can lock in your shelter expense for 30 years, your wages can outrun one of your largest expenses. Helping our clients understand this is important for those that are financially ready to buy, without resorting to catch phrases like- dating a rate. Then a refinance in the future can be a bonus.
The concern now is the Fed being backed into a corner with some signs of a slowing economy, but it is not impacting inflation as intended yet. So, do rates need to rise further to restrict growth? Some are questioning that now. Still others are questioning if the 2% inflation target needs to be adjusted higher because it may not reach the target. If the economy is slowing but inflation remains high, the Fed will have to decide when the economic conditions become concerning enough to jump in with policy to help despite higher inflation.
I mention these thoughts that I have seen expressed by different commentators because we await the Fed May meeting this Wednesday. Will be watching to see if the Fed changes any of its language after the recent data. This meeting is not scheduled for a rate decision or economic projections. The market mover will be if Fed tone changes from hammering home that they will hold out for lower inflation, or if they signal a softening on their stance.
Also, it’s the 1st Friday of the month when always get the employment data released. So far, employment numbers have held up well. We most likely won’t get a reaction from the Fed on policy until unemployment begins to rise, which today’s higher wage reading leads one to think we are not there yet.
Despite a few days of volatility, we start this week off with rates about the same as last week’s update. I take this as a good sign that inflation can still be coming in hot, and rates are holding at current levels. Rates have been in the new higher channel since April 11th when CPI showed progress towards lower inflation has stalled. Let’s see if the data for the remainder of the week unsticks any of that.
|
Loan Type |
Conventional 30 year |
Conventional 15 year |
FHA 30 year |
VA 30 Year |
|
Interest rate |
7.125% |
6.625% |
6.50% |
6.625% |
|
APR |
7.289%* |
6.794%* |
7.507%** |
6.769%*** |
LICENSED BY THE CALIFORNIA DEPARTMENT OF REAL ESTATE LICENSE A division of TYKY (DRE #01919683) (NMLS LICENSE #257773)
RATES ARE CURRENT AS OF 04-30-2024. SUBJECT TO BORROWER APPROVAL, FICO SCORE, LTV AND PROPERTY TYPE.conv
*APR IS BASED ON ESTIMATED FINANCE CHARGES OF $6935
**APR IS BASED ON ESTIMATED FINANCE CHARGS OF $10,969 THIS INCLUDES FHA MORTGAGE INSURA
NCE PREMIUM
***APR BASED ON ESTIMATED FINANCE CHARGES OF $8343
FEES INCLUDE 1% POINTS, NO Loan Origination Fee , $1095 PROCESSING AND $0 UNDERWRITING FEE
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.