The markets wait for the Federal Reserve

Financial markets | mortgage rate news

Most markets wait for the Federal Reserve to announce a move

‘Fed Week’ is upon us, and the expectation of another rate hike has impacted markets with most major indices down or sideways on Monday. Treasuries have resumed their decline this morning as the FOMC is set to deliver its fourth 75-bps increase, raising the fed funds target rate to 3.75% – 4.00%.

While we don’t expect a November surprise, markets will now turn their focus to what comes next, with many market participants expecting Federal Reserve Chairman Jerome Powell to hint at slowing the pace to 50-bps in December

Additionally, we may see a pair of 25-bps hikes to open the New Year, signaling a possible rate peak of 4.75% – 5.00%.

How is the battle against inflation going?

While cooling home price growth sprinkled in some inflation optimism in the US last week, Europe continues to struggle with rising rates of inflation; this month prices rose by a whopping 10.7% YOY and GDP slowed to just .2% for the quarter as soaring energy prices impacted business activity.

How did mortgage rates start the week?

Mortgages are beginning the week down about a quarter point, the yield on the 10-year note is back above 4.0% to 4.05%, and US stocks ended the day sharply lower. The Federal Reserve interest rate decision is certainly this week’s main event, but the economic calendar is also packed, including MBA mortgage apps, ISM Manufacturing, Factory Orders, and the October Employment report.  

When can home buyers expect conditions to improve?

The team at Yahoo Finance tackled this very question, and they went to Freddie Mac’s chief economist Sam Khater. In response to a question about the housing market, Khater stated, “Many potential homebuyers are choosing to wait and see where the housing market will end up pushing demand and home prices further downward.”

Mortgage Brokers Association deputy chief economist Joel Kan said, “MBA’s forecast expects both economic and housing market weakness in 2023,” when asked about the future of the market.

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