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Fed raises policy rates in this week’s Markets in a Minute!

Fed raises policy rates in this week’s Markets in a Minute!
June 15, 2018 Fred Kreger

 

 

For the Week Ending June 15, 2018

 The Markets and Interest Rates:

As expected, the Fed announced a ¼% increase in interest rates on Wednesday, for the second interest rate hike this year. Additionally, the Fed stated that their current goal for 2018 is two more interest rate hikes.
The benchmark federal funds rate is now at 1.75% to 2.00 %. This means that anyone who has a home equity loan, just experienced a .25% increase in their cost of borrowing from their line of credit.

 

Inflation:

The Fed’s announcement and decision on raising the fed funds rate ties in right along with the latest data on both wholesale and retail inflation. On Monday the latest data on consumer prices was released for the month of May. This was followed on Tuesday by the May producer price index report. Both reports showed a significant jump in inflation.

Prices on the consumer level rose a strong 0.2% for the month. Although this increase was in line with most analyst’s expectations, this is the fastest rate of retail price growth in 6 years. Prices on the wholesale level leaped 0.5 % in May. This very large increase was driven by the rising costs of oil and gas. The higher wholesale prices will likely drive prices on the retail level even higher in the coming months, as the costs for the production and delivery of goods and services for manufacturers and wholesalers continue to increase.

 

Retail Sales:

The report of the week that caught experts off guard was the May retails sales report. With a much higher than expected jump of 0.8%, this points to a very strong second-quarter GDP report. This increase reflects a strong economy and the high likelihood that the pace of inflation will continue to increase. If this trend continues, it is likely the Fed will raise rates sooner than later.

 

Mortgage Application Activity:

The Mortgage Bankers Association reported that applications for home purchase loans decreased 1.5 % from the prior week. Refinance activity declined 2.0%. Refinances stayed the same for the week at 35.6% of total mortgage loan activity. Rising interest rates and limited inventory are the likely reasons for the decline in total loan activity.

 

Next week’s potential market moving reports are:

• Monday June 18th – Housing Market Index
• Tuesday June 19th – Housing Starts
• Wednesday June 20th – MBA Mortgage Applications, Existing Home Sales
• Thursday June 21st – First Time Jobless Claims, FHFA House Price Index
• Friday June 22nd – Baker-Hughes Rig count

 

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can.

 

Please enjoy this quick update on what happened this week in the housing and financial markets.

 

 

As expected, the Fed raised policy rates a quarter percent at this week’s meeting. The increase will likely have little impact on long-term mortgage rates.
The surprise came with the Fed’s statement that two more rate hikes are likely this year. That’s one more than initially projected.
Strong economic indicators support the rate changes. Jobless claims dropped 4K from last week, and last month’s retail sales were higher than anticipated.

 

Median priced homes are flying off the shelves, so to speak. A recent industry analysis pinpointed the median listed-to-sale time frame at 64 days, a post-recession
low. 
A recent Fannie Mae survey found sellers more positive than buyers. Price increases paired with rising rates are tempering buyer attitudes.
CoreLogic reports the average U.S. homeowner gained $16,300 in home equity over the last year. Increased equity gives owners more flexibility in selling and
financing.

The soldiers were exhausted after an extended time in drills, largely due to one soldier’s consistent errors. Finally,
the drill sergeant said, “All right! All you idiots fall out!” 

 

As the rest of the relieved squad wandered away, the mistake-prone soldier remained at attention. The drill instructor walked over, stood face-to-face,
then raised a single eyebrow.

 

The soldier smiled and said, “Sure was a lot of ’em, huh, sir?”

 

Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These
rate trends can differ from our own and are subject to change at any time.

Sincerely,

Fred Kreger
American Family Funding
Certified Mortgage Consultant
NLMS # 1850 / 214640 BRE# 01215943 / 01371184
(661) 505-4311
Fred.Kreger@affloans.com
28368 Constellation Road
Suite 398
Santa Clarita, CA
91355

www.fredkreger.com

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do not demonstrate all options or pricing structures. Rates, terms, programs and underwriting policies subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans subject to underwriting approval. Some products
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