Lock and Shop! New Edge for Home Buyers
Take a look at our latest update on Mortgage rates anticipated to increase several times this year. See video and commentary below.
This could cause a significant impact on mortgages. Increasing the supply and removing the largest buyer simultaneously is like doubling down on upward pressure on rates. Stay tuned.
For borrowers, lock.
For Secondary…..reduce hedges?
Federal Reserve Board member Lael Brainard called for a rapid shrinking of the balance sheet.
Federal Reserve Bank of Kansas City President Esther George endorsed a similar policy.
Rising rates and a dwindling balance sheet are likely to weigh on the near-term growth outlook.
The Federal Reserve’s balance sheet may shrink faster than Wall Street is anticipating…
Since late last year, several central-bank Policymakers have been calling for higher interest rates. Federal Reserve Bank of St. Louis President James Bullard has been the most outspoken. At the start of 2022, he said interest rates need to go to 2% by year’s end. But as of last month, he changed his expectation to 3%.
That’s a long way from the current federal-funds target range of 0.25% to 0.5%. And Bullard’s guidance is above the Federal Open Market Committee’s projection of 1.9%. But based on the consensus expectation, we know interest rates are headed much higher.
But the still-unanswered question is how quickly the balance sheet will shrink. It grew from $4 trillion before the coronavirus pandemic to around $9 trillion currently. And as the central bank bought up all those bonds, it kept interest rates ultra-low.
But now, some policymakers are starting to call for a “rapid” shrinking of the number of assets the Fed holds, beginning in May. Wall Street is anticipating a pace of around $35 billion per month when the process starts, reaching $100 billion by the end of the year. That equates to around $475 billion.
Uncertainty about a more aggressive Fed policy path could push interest rates even higher, increasing near-term volatility for the S&P 500 Index…
Yesterday, Fed Board member Lael Brainard said inflation is growing too quickly and the central bank needs to act more boldly
Both voting members of the policy-setting Federal Open Market Committee feel easy-money policies have stayed in place for too long…
The effect became inflated demand for all types of goods because of too much liquidity in the financial system. In addition, a flood of dollars deteriorated its value. The supply-chain problems and war in Ukraine were unforeseen events that compounded the situation.
Longer-term, this is the appropriate path for interest rates. Avoiding a problem doesn’t make it go away. The central bank must be more aggressive now to spare itself down the road. But taking bolder steps upfront means it can always back off at a later date.
And by taking the pain in the short term, the central bank can work toward another long cycle of steady economic growth and restock its arsenal for the next crisis.
Take advantage of our Lock and Shop long-term rate lock. Call for details.