Conflicting economic data reported over the last week shows inflation may be easing in some places but still unaffected by rate hikes in others. Consumers are still spending despite higher prices due to inflation, according to the latest retail sales data from the Commerce Department. Advance sales were up 1.3% month-over-month, just above the 1.2% estimate from Dow Jones.
Earlier in the week, the producer price index came in below expectations. The Bureau of Labor Statistics showed wholesale prices with a 0.2% increase month-over-month and an 8.0% increase annually. Dow Jones estimates had the PPI rising 0.4% month-over-month.
Yields on the 10-year Treasury note bond dropped directly after the release of the PPI data and continued to fall as the week progressed, hitting a nadir of 3.671% on Wednesday. That is a stark contrast to the 4.21% the 10-year hit less than two weeks earlier on Nov. 7.
This decrease was welcome news for the mortgage industry as rates typically follow the trajectory of the 10-year Treasury note yield. The latest 30-year fixed-rate mortgage average from Freddie Mac showed a .47% decrease week-over-week hitting 6.61%. Freddie Mac recently updated how it collects mortgage rate data and instead of surveying lenders, the results are based on applications received from lenders. These are the applications submitted to Freddie Mac when borrowers like you apply for a mortgage.
Freddie Mac’s analysts said in their latest release, “Mortgage rates tumbled this week due to incoming data that suggests inflation may have peaked. While the decline in mortgage rates is welcome news, there is still a long road ahead for the housing market. Inflation remains elevated, the Federal Reserve is likely to keep interest rates high and consumers will continue to feel the impact.”
Keep in mind the average for a 30-year fixed-rate mortgage is not necessarily what a buyers will receive as their interest rate. Depending on the type of loan, credit history, and other financial factors, rates could be higher or lower. However, buyers should take caution if they see rates advertised at much lower percentage points and do their research. A lot of times the lowest rate is not the best financial option. That’s why it’s best to contact a Movement Mortgage loan officer to walk through all the possible scenarios.
FED GOVERNORS TALK FUTURE OF RATE HIKES
This past week, Federal Reserve governors gave interviews regarding their views on rate hike policy moving forward. Governor Christopher Waller said he is open to reducing the level of interest rates hikes at the Fed’s December meeting while Governor James Bullard noted that the current rate “is not yet in a zone that may be considered sufficiently restrictive.” Both Waller and Bullard are voting members of the Federal Open Market Committee.
Bullard contends that 5% could be a sufficient bottom-end rate with 7% being at the top end in order to control inflation and encourage potential disinflation in 2023. Current market pricing predicts the federal funds rate will top out at 5% in the middle of next year. The current federal funds rate is a range of 3.75% to 4%.
Waller said he felt comfortable with a 50-basis point rate hike at the next FOMC meeting, but he added, “I won’t make a judgment about that until I see more data, including the next PCE inflation report and the next jobs report.” The last PCE, or personal consumption expenditures index, shows a 6.2% annual gain and a 0.3% gain month-over-month in September. The latest jobs report was still strong with 261,000 jobs added but an unemployment rate up to 3.7%. The next FOMC meeting is Dec. 13-14.
*There will not be a Market Update next week due to the Thanksgiving Holiday.