Florida Mortgage Rates May Increase Pending the Fed’s Most Recent Position
One of the questions I get most as a Florida mortgage broker relates to the status of mortgage rates at any given moment. While there is really no way to gauge mortgage rate movement with absolute precision, there are a few things to look out for when it comes to getting a sense for what they’ll do over a fixed period of time.
Dan Green posted a great article today over at his Mortgage Reports blog where he cited the most recent home loan rate trend survey, which might provide us with some answers. This survey covers Conventional Mortgages only, and as such doesn’t pertain to VA mortgages, FHA mortgages, jumbo mortgages, or foreign national mortgages.
Based on the survey, results break down as follows:
- 19% of the experts and analysts reporting believe mortgage rates will increase
- 31% of the experts and analysts reporting believe mortgage rates will decrease
- 50% of the experts and analysts reporting believe mortgage rates will remain flat
For my money – I believe – as does Dan does over on his mortgage blog - that mortgage rates will increase.
Here’s what Dan told Bankrate.com:
“Inflation concerns resurface after the Fed’s April 28-29 meeting.”
Watch the Federal Open Market Committee Press Release for Mortgage Rate Movement Signs
- Image by Getty Images via Daylife
The Federal Open Market Committee (FOMC) will meet on Monday and Tuesday of next week. Most mortgage and financial experts content that they’ll hold the Fed Funds Rate steady inside the present rate of 0.000 to 0.250 percent.
This rate hold won’t be the news, however. What will make news is the Fed’s press release after this FOMC meeting takes place. We’ve said it here before: What Uncle Ben and Company “say” is often more impactful than what they “do.” Here’s why…
Most American’s believe, incorrectly, that the Fed controls mortgage rates. If this were the case, mortgage rates would have increased between 2004 and 2006 while the Fed was inflating its interest rate from 1 percent to more than 5 percent. We also see this when the Fed rate moves back down.
Fact: The Fed Does Not Set Mortgage Rates
See, the Fed doesn’t set 30-year fixed mortgage rates. Fed Funds Rate changes are established for the sole purpose of speeding up or slowing down the US economy. Period. Now, it’s true that the Fed’s policy can exert an influence on mortgage rates in an expansionary economy if the following takes place:
- Inflation reduces the Dollar’s long-term value
- Fed Funds rate changes are implemented to contain inflation
- The U.S. Dollar is tied directly to mortgage rates
Here’s How Florida Mortgages React to Fed Funds Rate Announcements
If the Fed releases a press release that makes reference to inflationary pressures, but the Fed makes no move to shift the Fed Funds Rate either up or down, markets will anticipate a weakening of the Dollar in months to come. This will, in turn, erode the value of mortgage bonds on Wall Street.
Remember: Lower bond prices mean higher mortgage rates.
I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 863-604-3019 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!
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