Mortgage Rates Are Going Up… NOT
All we have heard all year is that mortgage rates are going up and that the Fed is increasing interest rates but over the last few weeks only half of that is true. MORTGAGE RATES HAVE FALLEN A FULL HALF OF A PERCENT! The Federal Reserve, led by Chairman Powell, has made it their mission to increase SHORT TERM rates, called the fed funds rate. However, mortgage rates anticipating the increase have actually begun to drop. At the time of this writing the yield on a 2 Year TREASURY NOTE sits at 3.03% but the 10-year NOTE is at 2.68%. That means that the government is paying more to borrow money for a shorter period of time. This is the opposite of a typical market in which a borrower would pay a higher interest rate to borrow for a longer period of time. Inverted yield curves occur when short-term Treasury yields rise above long-term Treasury yields. An inverted curve has typically foreshadowed a recession. But recessions almost never occur within a predictable timeframe following a yield-curve inversion. The gap in timing has varied anywhere from 10 to 34 months.
We project the federal-funds rate to fall from a peak 3% at the start of 2023 to 1.5% by 2024. Accordingly, longer-term yields—including mortgage rates— should fall as well. Falling inflation should clear the way for the Fed to cut interest rates.
If you are considering financing options for a new mortgage, call Advocate Mortgage Services for a no cost, no obligation consultation on options, documentation requirements and quotes.