Yes, Mortgage Rates Have Actually Gone Up

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Recently the U.S. Federal Reserve’s Open Market Committee delivered its first overnight rate cut in nearly nine months, as expected, citing increased downside risks to the labor market. Last week we all heard about that decision from several Fed speakers, including Chair Jerome Powell and newly appointed Governor Stephen Miran.

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Powell largely stuck to the same messaging from his post-decision press conference, but Orion’s brokers noted that Miran, who is actually employed by the White House, set out several arguments calling for a federal funds rate almost 2percentage points lower than the current policy. Others, such as Vice Chair for Supervision Michelle Bowman, said recent labor market data showed "serious risk of already being behind the curve in addressing deteriorating labor market conditions." Chicago Fed President Austan Goolsbee expressed uneasiness over "front-loading too many rate cuts" based on just jobs data.

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Our brokers know, and tell clients, that nothing is ever easy or straightforward in economics or in the bond markets which determine mortgage rates. For example, clouding rate cut expectations last week was data showing a surprisingly strong economy and sticky inflation. The final estimate of U.S. Q2 GDP growth was revised up to an annual rate of 3.8 percent from 3.3 percent, primarily due to increased consumer spending. The Fed's preferred inflation gauge (the core personal consumption expenditures price index) increased to 2.9 percent year-over-year in August, in line with estimates but still well above the central bank's 2percent target.

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Economy

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Brokers also know that our economy is driven by jobs and housing, and the economy's growth in the second quarter of the year was much stronger than previously reported, a development that is good news for the labor market but will put upward pressure on mortgage rates. Sure enough, following the revised estimate, long-term bond yields surged higher, a signal that mortgage rates will tick higher in the coming days. That's because the stronger growth figures complicate the picture for future Federal Reserve rate cuts, showing fears of a slowdown may have been overblown.

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What does it all mean for those interested in refinancing or buying a home with brokers? No one can successfully and consistently predict interest rates, or the future, otherwise they’d be sitting on a beach somewhere and not giving anyone their forecasts. And mortgage rates never travel in one direction. So, while mortgage rates shift, Orion’s management and AEs continue to focus on the best products and services at competitive rates for our broker clients so that you can do the same with yours. And that is the most important thing.

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