Quick Stat: All Eyes on the Fed for Mortgage Rates
The Fed's strategy to curb inflation is spiking rates in the mortgage market.
Yesterday, the Federal Reserve Open Market Committee (FOMC) made an aggressive step in fighting inflation by raising the target federal funds rate by 0.75%, the largest single rate hike since 1994. The mortgage market is feeling the effects of the inflation battle, as rates increase quickly.
FOMC Action
Here is the Fed’s dot plot, which shows each committee member’s projections for the implied target rates for the current year and the next few years. This one shows the median projections from the March meeting indicated in gray, and the new projections from the June meeting as yellow dots and a green median line.
You’ll see that at the March meeting, the Fed’s median projection for 2022 year-end rates was just 1.875%, which has been revised to 3.4% as of the statement yesterday. The quicker move is indicative that the opinion of the FOMC in March that inflation could be controlled with more conservative hikes was wrong, as inflation remained rampant after the meeting. In May, urban consumer CPI (CPI-U) increased 1% month-over-month, and 8.6% year-over-year.
The Mortgage Market
Borrowers are feeling the effects of rapidly rising interest rates, as they reach their highest levels since 2008. According to the Mortgage Bankers Association weekly survey for the week ending 6/10/22, purchase applications were down over 15% compared to the same week last year due to the combination of low inventory and rising rates.
What are your thoughts? Are you or your clients struggling to stay in the market with soaring interest rates? I’d love to hear your thoughts and feedback! Email me at cooperthayer@kw.com.