Up, Down, and All Around - 3 Things That Will Continue to Affect The Mortgage Market

Last week was a roller coaster ride for mortgage rates.

On Monday and Tuesday of last week, the average mortgage rate dropped more than any other time in the past 10+ years; but that mortgage bliss was short-lived, because on Wednesday, they shot right back up. Different factors are influencing rates drastically right now, making them react them in different directions, mainly Upwards.

They should begin to stable out out in the long run once the Fed's first projected rate increase is behind us so that some of that uncertainty is removed as we settle into 2022; that is just one variable though.

Ukraine Conflict

When political conflict arises across the pond, investors typically flight to the safety of the bond markets. This results in the U.S. Treasury yields to drop, which will have an influence on mortgage rates. Per Sam Khater, Chief Economist at Freddie Mac, “...rates are expected to stay low in the short-term but will likely increase in the coming months.”

Inflation Pressures

With today's Consumer Price Index (CPI) report of 7.9%, inflation is among us, no questions there.

With increased Sanctions imposed on Russia, more specifically on #oilexports, the increase to oil prices will be just one of the many economic variables contributing to the ever apparent rising inflation that Global Economy is already facing in wake of the recent #pandamic.

Higher #inflation levels are one of the factors that affects the bond market and pushes rates higher. “The bond market cares about inflation,” says Barry Habib, CEO and founder of MBS Highway, “...By the Fed doing less to fight inflation—the bond market [is not happy.]”

And as the prices for groceries, gas, goods and services rise, at what point do consumers start to adjust their spending, and more importantly, their monthly budgets for a projected #homepurchase?

Fed Rate Hikes

At the Start of the year, the rumors of the Fed raising rates was just one of the factors pushing mortgage market higher.

Last week, Fed Chairman Jerome Powell gave his testimony before Congress and mentioned that he would “support a 25-basis-point rate hike” in the March meeting of the Federal Open Market Committee (FOMC). This .25-basis-point was the first time Chairman Powell gave any indication of what rate hike he would support and is lower than the previous enthusiasm for a 50-basis-point hike the market was anticipating.

The higher the hike, the better chances of cooling off the rising inflation steam.

Bottom Line

Various factors including how the Ukraine situation develops and how inflation reacts will be the short term items to keep an eye on; but as oil prices remain at these levels ($108/bbl today - up around 58% from 2021 average of $67.99/bbl), the cost of the day-to-day living expenses will continue to take it's toll on the American consumer. And with available housing Inventory sitting at just 1.4 months, the rising cost of housing (biggest monthly consumer expense) will continue to squeeze the consumer from both directions thus adding more signs that the rising threat of inflation will be the biggest indicator of where rates will end up going, up.

Sources: HousingWire,?HousingWire,?HousingWire,?MBS Highway,?Mortgage News Daily

Ralph Tapia is a Mortgage Loan Officer located in Houston, Texas.

I left the Oil and Gas Industry after 11 years before deciding to get my Mortgage Originator License and go full time. If you need home financing or have questions about home financing, I'm just a phone call away.

RALPH TAPIA?| Sales Manager & Mortgage Loan Originator NMLS# 1420289 9811 Katy Freeway Suite 1025 Houston, TX 77024 C: 281.881.0612 [email protected]

Want to Schedule a Meeting? Pick a time slot here:?https://calendly.com/ralphtapia

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