Orion’s brokers, and your clients, are impacted by mortgage rates. And mortgage rates are determined by supply and demand, and overall interest rates are determined by the economy. Two pieces of news hit the tape last week of interest. The first is that Disneyland has reopened after being closed 412 days. The second is that politicians are saying New York will “reopen” by July 1. Orion’s management feels it is important for our brokers to know the implications of this, and that you let your clients know what is happening with them. And here, in the beginning of May, are signs that the U.S. economy is moving, and wants to move, forward. Not only is it springtime, but as more people are vaccinated more portions of the economy are opening up. Unemployment, although bumpy, has generally been showing reductions, and there is optimism out there.
We are already done with 1/3 of 2021. U.S. economic data points to an economy that is gaining momentum as the long-awaited consumer boom has arrived. Last week we learned that Personal Income and Spending were up significantly, primarily due to stimulus payments. Total retail sales were 17 percent higher in March than they were prior to the pandemic, and every subcategory of store benefited from consumers’ desire to spend.
Given that a portion of this spending was due in part to the generous stimulus most households received, the question of how sustainable this elevated spending is top of mind. Many economists point to much improved household balance sheets buoyed by heightened savings over the last year as potential fuel for successful service re-openings this summer. This assumes businesses, which are currently struggling to hire, can find workers to fill the expected demand.
Orion’s brokers know that's urging demand also brings inflation concerns, and higher rates, including mortgage rates. Consumer prices were up 2.6 percent in March compared to one year ago, and while last year’s low baseline will lead to elevated annual comparisons, recent inflation readings pointing to increasing prices.
Despite those concerns, Orion’s capital markets group has noted that in last week’s Fed meeting the Fed continues to say it will wait until it feels higher prices are sustainable before making any major changes to monetary policy which could leave the near-term direction of rates up to market sentiment. This is good news for your borrowers, as few appreciate rates moving higher, regardless of the reason.