The economic landscape is shifting and the time to refinance is NOW for many! We put together the following market insight to give you an idea of what is happening in the mortgage markets.
Refinance Market Insight
The key inflation indicator for the FED was flat last month (increased 0.2% from a yr. ago as expected). The report comes with the markets pricing in a 100% chance of a rate cut in September, with the only uncertainty being whether the Fed will take the incremental step of lowering benchmark rates by a quarter percentage point or being more aggressive and moving a half-point lower.
All eyes were focused on the non-farm payrolls report for August, released 9/6, report was expected to show an increase of about 175,000 new jobs but the numbers were soft at only 142,000. The jobs report will likely influence the Feds level of rate cut and shift the markets focus from a possible recession to a soft landing.
This week the focus will shift to the CPI data release on 9/11 and the PPI data release on 9/12. If either of these show a spike in inflation rates will immediately be impacted (upward). We feel if the data is flat or meets market expectations, we likely will see little change.
Keep in mind that rates have softened roughly 1.5% from their highs. The average mortgage rate from 1971 to 2024 was 7.73%. The average federal funds rate in the United States from 1971 to 2024 was 5.42%, and we currently sit at an averaged Fed Funds rate of 5.375%. Some analysts are calling for mortgage rates to return to their historic averages, trending between 5.875% and 7.875%.
It is important to note that the fixed rate market will be impacted by these changes well in advance of the meeting/report/change. Most, if not all, of the recent down trend is due to the anticipation that the Fed will have to start cutting rates, signaling a weakening in the economy. A weaker economy signals a likely flight to safety (out of the stock market and into the bond market as we saw on 8/5 this yr) causing mortgage rates to drop. So as we always say, bad news equals good news for mortgage rates.
More important is that a downward trend in rates is not a straight line and the information above is impacted by numerous variables. It’s likely that if the Fed cuts a half of a percent, signaling a weaker economic outlook, rates could trend down slightly (slightly because we already anticipate a cut with 100% certainty). If the Fed cuts only a quarter of a percent rates would likely remain flat or could even edge up slightly due to this move appearing to signal a less fragile economy.
We suggest that if you are looking to refinance in the near future, that you take the time to Apply Now so that you will be ready. A number of clients applied this week choosing to float their rate while completing the appraisal & underwriting pieces. This allows us to determine new loan to value, potential mortgage insurance costs, and rate options. Your file would quickly reach clear to close subject only to the rate lock. The appraisal is valid for 4 months, so this would allow us to monitor rates into the first or second week of 2025!!! We can then watch the Fed meeting, the election, and any other geo-political events that may shape our market.
Act Now to Start your Refinance
The first step is to complete our online loan application by clicking the orange “Apply” button!
As part of the online application, you can authorize us to pull credit now, or you could wait until speaking with me.
The Legacy Mortgage team collectively boasts over a 135 years of industry experience and is well versed in a variety of loan programs including fixed mortgages, ARMs, VA loans, FHA, first time homebuyer and more! We have the privilege of partnering with the best local agents, appraisers and attorneys the Upper Valley has to offer. When you work with Legacy Mortgage you are working with the best local professionals from beginning to end. Reach out to the Legacy Mortgage team to get the loan process started. Call us today, 603-643-7400.