Rate hikes – is that all there is?
Yet Paige Hernandez (pictured center), of Heritage MTG based in Chino, Calif., wonders about the repetitive nature of consistent hikes to the interest rate. Historically, past central banks have allowed for some time to pass to test the effectiveness of a rate hike before implementing another – unlike the current Federal Reserve that has raised rates virtually every month without that traditional testing period.
“When is enough, enough?” Hernandez asked rhetorically. “It seems as if the Fed is hellbent on using the one and only tool they have at their disposal, increasing the prime rate, to prove their point. Maybe their economic markers are off base. Maybe they could benefit from a different strategy. Even though prime rate doesn’t directly flow to mortgage rates, we’re definitely feeling it in this sector.”
Lower mortgage rates is a widely shared goal, particularly for those in the industry already dealing with aligned factors making their jobs more challenging – including limited inventory, erosion in affordability, inflation, supply chain issues, and a precipitous drop in refinancing activity.
Melissa Cohn (pictured right), regional vice president of William Raveis Mortgage, believes the impact of the Fed’s actions remains to be seen and is contingent on upcoming jobs reports and CPI data ahead of its next meeting in September (as there is no meeting scheduled in August). She noted that the Federal Reserve’s chairman, Jerome Powell, alluded to this in his commentary as the 2% inflation goal continues to be pursued.
“At the Fed’s Press conference, Federal Reserve chair Jerome Powell said that rates will have to stay higher for longer to achieve the 2% goal, and that rate hikes are starting to work,” she said. “But there is much more to go and their next step will be a result of the data in the next two months.”
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- Source: https://www.mpamag.com/us/news/general/federal-reserve-interest-rate-reaction-mixed/454178
