"We’ve enjoyed historically low interest rates for several years and now are in an environment where pressure to increase will continue to persist."
The bond market went through another rough week leading to another increase in rates. The end of the week showed some signs of life with the selloff in bonds beginning to slow. We’ve enjoyed historically low interest rates for several years and now are in an environment where pressure to increase will continue to persist. This is in large part due to two main reasons. First, the Fed wants to unwind their balance sheets. They’ve propped up the economy for the recent past and now are looking to the private market to pick up the slack they’ve been holding for the better part of a decade. Unfortunately for rates, the private market will demand a higher yield for purchasing the bonds the Fed is unwinding. Second, there seems to be several data points consistently reflecting a healthy to overheating economy. The Fed is battling these sentiments through increasing short term rates to starve off inflation concerns. Many analysts are concerned the economy is not as healthy as the reports are showing, and once you dig into the data many cracks can be found. For example, housing starts blew through their forecasted number this week. However, when you look at the data it shows single family houses were down while multi-housing was up significantly. Is this just a sign of the times, meaning the demand for single family housing is down? As interest rates continue to rise additional pressure will be placed on the economy to maintain consistent improvement. For now it is best to monitor the market on week to week basis, and include flexibility in your budget to account for any unexpected surprises.
Information Courtesy of: Mike Kazell | Sr. Mortgage Loan Originator | Hallmark Home Mortgage, LLC NMLS #53441 | firstname.lastname@example.org | Direct/Text: 720-593-9529 | Office: 720-512-5501
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