Mortgage Rates Move Higher on Fed Dot Plot Projections

How many hikes can the Fed get in this year? The Fed estimate is two more. Mortgage rates rose on the news.

Mortgage News Daily reports Mortgage Rates Higher Following Fed Forecasts.

Mortgage rates moved higher today, following the Fed's much-anticipated policy announcement. Although the Fed changed quite a few words from the announcement's previous iteration (far more than normal), it wasn't the announcement itself that did the damage. Rather, it was the Fed members' economic projections, which include an assessment of where the Fed Funds Rate will likely be at the end of the next few years.

Specifically, a few of the Fed members who'd been holding out for slightly lower rates in 2018 moved their forecasts up enough to increase the odds of a 4th rate hike by December. This was already a strong possibility, but before today, those in the "3 hike" camp had a stronger case.

While the Fed's rate doesn't directly affect 30yr fixed mortgage rates, shifts in the Fed's rate hike outlook definitely do. In the bigger picture, this was a fairly minor adjustment. Moreover, rates markets were somewhat soothed by the press conference with Fed Chair Powell, which followed half an hour after the announcement.

The net effect was a slight increase in rates that leaves us a little bit closer to the 7-year highs seen in mid-May. Tomorrow morning brings more risk with the European Central Bank's policy announcement. Big moves in either direction are a possibility.

"Today's Fed Statement and Chairman Powell's press conference didn't sit well with bond markets today, as yields rose. I've been locking early as possible, this is precisely why. It's a RISING rate environment, gambling on rates dropping is less than astute," said Ted Rood, Senior Originator.

Tweets of the Day

That is worth repeating.

Inventory is always low and demand is always high at peaks. Think back to the alleged shortage in 2006 when people were standing in line overnight, in Florida for the "chance" to buy a condo in a lottery.

Dot Plot

Also note the Fed's insistence on paying interest on excess reserves is a free handout to banks.

Mike "Mish" Shedlock

Comments
No. 1-5
MntGoat
MntGoat

Inventory moved up significantly in late 2005, 2006 and 2007 well before the housing bust. Inventory is still really low and not moving up. AND FAR less new homes have been built this cycle. In fact new home completions are still below prior recession lows.

FlyOver_Country
FlyOver_Country

...'Inventory is always low and demand is always high at peaks. Think back to the alleged shortage in 2006 when people were standing in line overnight, in Florida for the "chance" to buy a condo in a lottery....

'Alleged' is the key word, in 2006 housing inventory was way too high for the number of 'truly' qualified buyers. Because anyone could qualify for a mortgage in 2006, it gave a false impression a housing shortage. Today, we truly do have a housing inventory shortage for qualified buyers. Mish, how do you square the housing inventory of 2006 with 2018?

Bam_Man
Bam_Man

Every single HELOC payment in the country will be higher next month also.

MorrisWR
MorrisWR

The Fed has been pumping up a fraudulent system. It may seem like a win now but when it comes down, the Fed will take a lot of heat.

JonSellers
JonSellers

I live in E Central Florida and the economy is booming. Greater Orlando is actually number 1 in the country in manufacturing growth. We have a ton of small tech manufacturing, massive fedgov/DOD manufacturing, and crazy rocket manufacturing by SpaceX and Blue Origen. We absorbed hundreds of thousands of Puerto Rican refugees without a blip. Even local governments are giving decent (2 a 4)% pay raises again. I don't know a single unemployed person. Being the South, every grandma seems to have a new F-150. From my perspective, the Fed has knocked it out of the ballpark, economy wise. Of course I would liked to have seen some prison time for a few bankers. But that was Obama's job.

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