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“With inflation still running at a red-hot pace, it has no choice but to raise rates,” she told Mortgage Professional America. “At the same time, the economy is starting to show signs of weakness which has – coupled with the Fed’s ongoing bond purchases – brought the yield on the 10-year treasury down to 2.80% today from a peak of nearly 3.50% a month ago.”
There’s good news for the industry too: “Mortgage rates have dropped in the past 10 days by as much as 0.50% in some cases,” Cohn noted. “Lower mortgage rates are a welcome relief to homebuyers. While no-one wants a weaker economy, lower rates are just what the real estate market needs in the middle of the summer.”
Read more: Federal Reserve to begin pursuit of ‘soft landing’
She reached out to MPA after the Fed’s action with additional insights on the immediate impact: “Both stocks and bonds cheered the move and post-hike comments from Fed chairman [Jerome] Powell. The 10-year bond yield remains below 2.80%, and that is good news for mortgage rates. If the rally holds, we can look for better rates in the morning and will go back to data watching for the direction of mortgages for the balance of the summer. Remember, bad news for the economy is good news for bonds and mortgage rates!”
Michele Raneri, vice president of US research and consulting at TransUnion, offered a different take – decidedly less rosy an outlook than Cohn’s. “Interest rates have slowly been rising the last several months, and the Federal Reserve’s 0.75% rate hike today will likely most impact consumers with mortgages and credit cards,” Raneri told MPA. “Interest rates on new fixed rate mortgages – which are often a majority of mortgages – often increase after a Fed interact rate increase, which will make buying new homes or refinancing more expensive.”
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