Weekly Mortgage Rate Update9-27-23

 

The key message from last week’s FOMC meeting was that the rate path is - higher for longer. Mortgage rates still inching higher week over week.

The Fed published its economic projections that showed at least one more hike this year and the path of rates in 2024/2025 was higher when compared to the last projections.   Last week I mentioned the Wall Street Journal reporting that a soft landing is going to be hard to pull off.  Powell echoed that narrative in his comments. Stating he wouldn’t consider the base case for the economy to be a soft landing, and that wasn’t a consideration in their policy decisions.  We recall that the Fed’s goal is slower growth and higher unemployment to get inflation under control.

As I mentioned in last week’s update, the 10-year note was near an important support level that had held since October 2022,  and if it broke through rates would move higher.  That is what has happened and now testing support around 4.50%.  The 10 year is a good guide for the direction of long-term rates, such as mortgage bonds.  It’s now at the highest level since 2007.

 This move higher is based on the outlook for inflation, namely with oil prices rising. Fiscal mismanagement is another huge factor in recent bond moves, with another debt ceiling looming September 30^th.  Fitch downgraded the credit rating for US treasuries at the end of July , pricing has been eroding since then. They noted the downgrade was the result of a “steady deterioration in standards of governance over the last 20 years.” Bonds move higher because riskier assets require a higher rate of return.  Also, the supply of bonds hitting the market to finance the debt require higher rates to keep up necessary demand.  

Friday is the most important day this week for mortgage rates.  We get PCE-the Fed’s key measure of inflation.  Also, we get a glimpse of the consumer strength with personal income and spending.  

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