Interest rates for buying a home on the Palos Verdes Peninsula eased this week . The following are excerpts from the newsletter on interest rates published by HSH Associates
“Partly due to increasingly bellicose saber-rattling between the U.S. and North Korea, but also more than partly due to inflation that simply can’t find a reliable toe hold, mortgage and other interest rates found new reasons to decline this week. With this as the backdrop, it seems likely that we’ll set new 2017 lows for mortgage rates in the days ahead, possibly beating previous lows by a few basis points. This is remarkable, given that the Fed has raised the federal funds rate three times in the last eight months.
To be fair, the fed funds rate and mortgage rates don’t have a whole lot to do with one another, but a central bank tightening policy is usually done to try to attenuate above-trend growth or inflation. In this instance, neither has been the case, so it has been just a not-so-routine removal of excess accommodation, a process of removing emergency-level supports that the economy simply doesn’t need, with these moves having very little overall effect on economic or labor market growth to date.
Odds favor that we will see a different kind of excess accommodation removal beginning in a few weeks with what is expected to be the onset of the Fed starting the protracted process of trimming its balance sheet. Analysts have come to expect that this will come at the expense of another lift in the federal funds rate, and odds of a lift in the fed funds rate in September are currently reckoned at about zero. The process of the Fed recycling fewer funds into mortgages and Treasuries will slowly increase in impact over time, but there currently are few expectations that this will disturb financial markets (or raise rates) very much, at least at the onset.
That said, the Fed has been expected to kick the next rate hike down the road to December’s meeting, but there have been no demonstrably durable acceleration in economic growth yet, and already-limited inflation pressures have faded over the last few months. Couple this with expectations for near-term fiscal policy changes to goose growth all but absent from the market, odds makers in the futures markets put the chance of a December move by the Fed at only about one-in-three.
With plenty of political trouble, only moderate domestic (and global) growth to be seen and no imminent inflation threat, interest rates simply have little reason to rise.
Mortgage rates seem poised to slip again next week, but probably not by very much. That said, as this week’s average conforming 30-year FRM as reported by Freddie Mac was only two basis points above 2017 lows, it’s likely that we’ll see “new lows for mortgage rates!” headlines when Freddie reports again next Thursday. We think a 2-4 basis point decline is what we’re likely to see in that benchmark, little more than statistical noise but enough to generate a little mid-summer excitement.”
The following are interest rate quotes from John Alvin of American California Financial:
|30 Yr Fixed FHA|
|Conforming 30 Yr Fixed up to $424,100|
|Conforming Jumbo 30 Yr Fixed $424,101 – $636,150|
|Jumbo 30 Yr. to $1.5 Mil|
|Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)|
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