For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.By G. Steven Bray
Following the surprisingly strong jobs report at the beginning of the month, mortgage rates have started edging up again – but without conviction. Rates are being affected by several factors right now, and those factors seem fairly balanced.
On the one hand, we have deteriorating economic conditions in Europe and China worrying investors of a global economic slowdown, which would push rates down. The Federal Reserve has acknowledged this ‘fear factor,’ which made markets very happy a couple weeks ago and supported lower rates.
On the other hand, US economic conditions remain healthy, as evidenced by the strong Jun jobs report earlier this month and today’s very strong retail sales report. On top of that, the inflation report last week came in a tad higher than expected, and inflation is the big enemy of low interest rates.
I expect rates to remain choppy and noncommittal until the end of the month when the Fed meets again. Based on Fed head Powell’s Congressional testimony last week, markets fully expect the Fed to cut short term rates by 25 bp at that meeting, so that action probably won’t move the needle. However, if the Fed fails to cut rates or cuts more than expected, watch out. And we’ll talk about those possibilities in the upcoming weeks.