Fed Preview Archives - Hanover Mortgages

Apache is functioning normally

September 18, 2023 by Brett Tams

Posted on: September 18, 2023

The Federal Open Market Committee’s next meeting is scheduled for September 19, 2023. A policy update, which will include any rate adjustments, is expected to be announced on September 20. As the next meeting date approaches, all eyes are on the decision-makers at the Federal Reserve.

Let’s explore what experts expect in the coming meeting and what that could mean for home buyers.

Check your VA home buying eligibility. Start here (Sep 18th, 2023)

What the experts expect

The CME FedWatch Tool, a tool investors use to predict Fed policy changes, indicates that there is over a 90% chance that the Fed will keep interest rates the same at the meeting later this month. As of September 6, there’s less than a 10% chance the Fed will increase the federal funds rate.

Although this tool is helpful, it’s not a foolproof estimation. In August, Jerome H. Powell, chair of the Federal Reserve, made a speech at the Jackson Hole Symposium. Powell kicked things off by saying, “It is the Fed’s job to bring inflation down to our 2 percent goal, and we will do so. We have tightened policy significantly over the past year. Although inflation has moved down from its peak — a welcome development — it remains too high. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

It’s impossible to know what will ultimately come out of the FOMC meeting. But many expect rates to stand where they are.

Could mortgage rates fall?

Mortgage interest rates have been on the rise since March 2022. Until that point, American home buyers were enjoying historically low interest rates on home loans. But that all changed when interest rates started climbing.

Since March 2022, mortgage interest rates have increased dramatically. From an average of 3.76% on 30-year fixed-rate loans in March 2022, rates are currently sitting at 7.18% for the same loan type. Rising rates mean more expensive loan options for prospective homeowners. In some households, higher interest rates have put a home purchase out of reach.

If the Federal Reserve pauses its ongoing battle against inflation, interest rates will remain steady at the upcoming meeting. For potential home buyers, this pause will allow mortgage rates to remain where they are for now. The interest rate stability could be a game-changer for anyone looking to buy a home.

Beyond holding rates steady, some experts foresee a pause in interest rate hikes, leading to a drop in home loan interest rates. More stability in the market could allow lenders to offer slightly lower rates for home buyers.

Check your VA mortgage rates. Start here (Sep 18th, 2023)

What this means for you

If you are looking to take out a loan of any kind, a pause on interest rate hikes is a welcome reprieve. At the very least, you won’t face any higher interest rates. But in the best-case scenario, you can take advantage of the market’s temporary stability to lock in a slightly lower interest rate.

For anyone looking to purchase a home, a pause in rate hikes could be the signal that the cooling housing market has been waiting for. Any dip in mortgage rates could reignite the hot market conditions that persisted throughout 2021.

If you want to make a mortgage move, by either purchasing a new house or refinancing your current mortgage loan, a pause on interest rate hikes might be the appropriate time to act on your plans.

Future rate hikes

If the Federal Reserve doesn’t increase interest rates at the upcoming meeting, it will mark a big change. We’ve been seeing rates climb for over a year. A pause to higher rates would be a welcome reprieve.

Of course, we can only wait to see what the Fed will do at the next meeting. But even if interest rate hikes are paused for this meeting, it’s possible rate hikes will continue at the next meeting. After all, Powell’s recent speech made it clear that taming inflation is still the top priority for the Federal Reserve.

If you are planning to take out a home loan in the near future, keeping an eye on the changing interest rate market could make a big difference. A higher interest rate could eat into your home purchase budget, which means locking in the lowest possible rate is critical.

Check your VA home buying eligibility. Start here (Sep 18th, 2023)

Source: militaryvaloan.com

Apache is functioning normally

June 10, 2023 by Brett Tams

Posted on: June 9, 2023

A break from the norm

The Federal Reserve is getting ready for its fourth meeting of the year, and if you’ve been reading the headlines, it’s shaping up to be a much different one than its precedents.

At all three of the central bank’s previous 2023 meetings — and at every meeting since March 2022, in fact — the Fed has voted to increase its benchmark interest rate by anywhere from 25 to 75 basis points in an attempt to tame inflation.

It appears those days may be numbered, though. According to predictions, though, there’s a good chance the June 13-14 meeting will mark the end of those rate hikes — at least temporarily.

What would it mean for mortgage rates if that were true? Here’s what you need to know.

Check your VA home buying eligibility. Start here (Jun 9th, 2023)

Pausing rate hikes

According to the CME FedWatch Tool, which uses investor activity to predict Fed policy, there’s about an 80% chance the Fed increases its benchmark rate at next week’s meeting. There’s only a one-in-five shot the bank hikes rates to the 5.25-5.5% range — a 25-point increase compared to last month.

Members of the Federal Open Market Committee seem to be in agreement, at least judging by recent media statements.

“Skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming,” Fed Governor Philip Jefferson said in a recent speech.

Philadelphia Fed President Patrick Harker said something similar days later, telling reporters, “I am in the camp increasingly coming into this meeting thinking that we really should skip.”

Mortgage rates could fall

If the Fed pauses its rate hikes, it could undoubtedly trickle down to mortgage rates. While long-term mortgage rates aren’t directly tied to the Fed’s moves, if you look at where 30-year loan rates have trended over the last two years, it’s clear the central bank’s policies have an impact.

Since the Fed started its rate-hike journey in March 2022, the average 30-year fixed-rate mortgage climbed from 3.76% to a high point of 7.08%, according to Freddie Mac. As of June 1, they sit at an average of 6.79% — up 170 basis points in just a one-year period.

Should the Fed pause its rate hikes, it will likely give borrowers a reprieve from further bumps in mortgage rates — at least for the foreseeable future. It could even result in slightly lower rates, according to industry players. The Mortgage Bankers Association predicts rates will drop to 6% by the end of the third quarter. Fannie Mae expects a 6.2% average.

Act fast if rates drop

Unless conditions change drastically in the next few days, most signs point to a pause in the Fed’s long stream of rate hikes. For homebuyers and refinancers, this could mean more stable mortgage rates or, potentially, even lower rates in the weeks to come.

If you’re thinking about buying a home or refinancing your current loan, prepare your documentation and application materials, and be ready to pull the trigger if a rate drop occurs. If the Fed does skip a rate hike this month, it may only be temporary, so acting fast will be critical to snagging that lower rate.

Check your VA home buying eligibility. Start here (Jun 9th, 2023)

Source: militaryvaloan.com

Apache is functioning normally

May 3, 2023 by Brett Tams

Posted on: May 3, 2023

Another meeting, another rate hike

It’s that time again. We’re a week out from the next Federal Open Market Committee meeting and, more than likely, yet another hike in the federal funds rate.

The Fed has raised rates at its last nine meetings in an attempt to thwart inflation. Though its attempts have largely worked (inflation has eased considerably since the rate increase campaign began last March), many of the FOMC’s members project there’s at least one more rate hike in the cards for this year.

As one recent Federal Reserve president told reporters, “One more move should be enough for us.” How much will that one rate hike be when the Fed meets May 2-3, and what will it mean for mortgage rates? Here’s what you need to know.

Check your VA home buying eligibility. Start here (May 3rd, 2023)

One last hike?

If you look at the projection materials from the last Fed meeting, the bulk of FOMC members think one more 25-basis-point rate hike will be required this year. There are a handful that predict more are needed or, at least, larger ones, to properly tame inflation.

The markets appear to agree with the former. According to the CME FedWatch Tool, there’s about an 80% chance the Fed increases its rate by 25 points next week. About 20% think there will be no rate hike at all.

Not many members have indicated how they’ll vote this time around, but Atlanta Federal Reserve President Raphael Bostic recently told CNBC’s Squawk on the Street that “One more move should be enough for us to then take a step back and see how our policy is flowing through the economy — to understand the extent to which inflation is returning back to our target.”

If the Fed does move in this direction, it would bring the benchmark rate up to the 5-5.25% range — the highest it’s been since 2007, just before the Great Recession.

Mortgage rates could move higher

Long-term mortgage rates aren’t directly linked to the Fed’s rate, but if you look at the trajectory of 30-year loan rates over the last two years, it’s clear the Federal Reserve’s moves have made a difference.

Since the Fed started increasing its rate in March 2022, the average rate on a 30-year mortgage has climbed from 3.76% to as high as 7.08%, according to Freddie Mac. While it’s ping-ponged between 6% and 7% since November, rates are still nearly twice as high as they were prior to the Fed’s rate hikes.

Still, that doesn’t necessarily mean mortgage rates will rise after the May Fed meeting. Many times, markets price projected rates in advance — which may be why mortgage rates increased last week after five straight weeks of declines.

How buyers should proceed

If you’re hoping to buy a home and your budget is highly rate-sensitive — meaning even a slight bump in rates could put things out of your price range — then it might be smart to lock your rate now before the Fed makes any moves. While there’s no guarantee it will happen, there’s a definite possibility that rates could increase both as we get closer to the Fed’s meeting date — as well as in the days following.

In the event your purchase or refinance is further out, you may have wiggle room to wait. Most experts — the Mortgage Bankers Association and Fannie Mae included — expect rates to fall under 6% by the end of the year.

Check your VA home buying eligibility. Start here (May 3rd, 2023)

Source: militaryvaloan.com

Apache is functioning normally

April 27, 2023 by Brett Tams

Posted on: April 28, 2022

Higher mortgage rates are likely in the cards

The Federal Reserve is set to have its third meeting of the year next week, and for hopeful mortgage borrowers, it’s probably not good news.

Given the nation’s skyrocketing inflation rate (the highest since the early 1980s), plus recent commentary from Fed Chair Jerome Powell, higher mortgage rates are almost guaranteed in the days and weeks following the bank’s May 3-4 meeting.

It will only add insult to injury in an already affordability-challenged housing market. Home prices are up 19% over the year, according to the Federal Housing Finance Agency, and last week’s average 30-year mortgage rate? That clocked in at 5.11% — a whopping 200-basis-point uptick since the start of the year.

For homebuyers and borrowers mulling a refinance, it signals one thing: Act now or pay more.

Click here to check today’s VA rates (Apr 27th, 2023)

What the Fed has planned for May

The Federal Reserve has already indicated it plans to tighten monetary policy as the year goes on. The bank increased the federal funds rate for the first time in six years at its March meeting, and Powell has indicated it will do so again at next week’s gathering too.

Only this time? Powell says a 50-basis-point hike is possible — double what was seen back in March.

“If you look at the last tightening cycle, which was a two-year string of 25-basis-point hikes from 2004 to 2006, inflation was a little over 3%,” Powell said last week at an International Monetary Fund meeting. “Inflation is much higher now, and our policy rate is still more accommodative than it was then. So it is appropriate, in my view, to be moving a little more quickly. That points in the direction of 50 basis points being on the table.”

To be clear: Inflation isn’t just “much higher” than the last time around — it’s significantly higher. Earlier this month, inflation came in at 8.5%, the highest point since 1981. So Powell’s hint at a more aggressive rate hike is probably more than just speculation. In fact, according to CME Group, there’s a 96.5% chance that the federal fund’s target rate will jump 50 basis points next week, putting it at 75 to 100 for the first time since pre-pandemic days.

How mortgage rates respond to Fed actions

To be clear: The Federal Reserve doesn’t dictate mortgage rates, but when it tightens policy, interest rates on loans and mortgages tend to rise.

Just take March’s Fed meeting as a case in point: After the bank raised the federal funds rate for the first time in years, mortgage rates surged. Rates on 30-year loans went from 3.85% prior to the meeting, jumped to 4.16% the week after, and have climbed steadily ever since. They’re now at 5.11%, 126 basis points higher than before the meeting.

Most experts predict mortgage rates will continue their upward climb on the backs of another Fed rate hike but just how far they’ll go is uncertain. One thing that’s for sure? Borrowers likely won’t see lower rates for some time (at least until inflation is under control).

Move quickly or adjust accordingly

If you’re eyeing a refinance or home purchase, your best bet is to lock in a rate quickly. Once the Fed announces its official actions next week, there’s no telling how high rates could climb in the weeks following.

If acting now just isn’t possible, you’ll want to adjust your expectations accordingly. Prepare for a higher monthly payment or reduced refi savings, and think about alternative loan options, like ARMs, which offer lower rates at the outset of the loan.

And if you’re still looking for a property, reduce your price range to ensure you stay on budget. You can also consider smaller properties or townhomes or expand your search into more affordable, rural communities. Both steps can help you offset the added costs that higher rates will come with.

Click here to check today’s VA rates (Apr 27th, 2023)

Source: militaryvaloan.com

Apache is functioning normally

April 24, 2023 by Brett Tams

A rate hike is âappropriateâ The Federal Reserve is poised to raise rates at its March 15-16 meeting â the first of seven possible rate hikes expected this year. The […]