Mortgage Rates…. Now What?

May 17, 2021

Orion Lending offers some fine products at a very good price for you and your clients. But we also know that you like knowing what is going on with our economy, since that can move mortgage rates for your clients. Spoiler alert: the pandemic still trumps weekly and monthly economic news, and will for quite some time. But the effects of the pandemic will continue to be felt for a long time, and brokers should know that the economic news we receive are ways of taking the temperature of the recovery.


Consumers, armed with stimulus checks and a year of elevated savings, have pushed demand for finished good far beyond what the current global supply chain is able to meet. As anyone who has taken an economic course will tell you, when demand outpaces supply the result is inflation.


Sure enough, the Consumer Price Index increased 0.8 percent in April and as up 4.2 percent over the past year; both of which were greater than what economists were predicting. April’s monthly increase was the higher monthly increase observed since 1981. We have seen for the last few months that producer prices have been rising and April’s report confirms that they have been able to pass on those higher costs to consumers.  


Additionally, labor challenges are adding to businesses’ price pressures from raw goods by putting upwards pressure on wages. Outside of autos, gas, building materials and food services, demand for goods moderated in April as some consumers shifted spending back to services.  Rising inflation will continue to influence the direction of mortgage rates, which declined to 3.11 percent on the 30-yearfixed for the week ending May 7.  


For now, in mid-May, the Fed, through the operations of its Open Market Committee, is maintaining its stance that it expects current inflation levels to moderate and to keep its supportive monetary policy in place through the end of the year. Does that mean steady rates for Orion’s brokers and your clients? Not necessarily. The speed of the economic recovery will truly determine mortgage rates, so stay tuned!

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