There are several moving targets that can have a direct effect on what interest rates will do over the next few months.
Rates on both the short term and long term rates are close to historic lows. The short term and long term rates don’t necessarily correlate. The Federal Reserve already dropped the overnight Fed Funds Rate a ¼%. The domestic economy remains strong, but international economies are weak, and their interest rates are substantially lower than the US, some are in a “negative” interest rate. International weakness, and trade uncertainties are pulling the US rates down.
There is a perception by the futures market that the Federal Reserve will drop the Fed Funds rate at least one or two more times this year. A wild card is if the Fed drops the rate at the September Fed meeting aggressively at ½%. The tricky thing is the long term rates and mortgage rates can at that point go up, as the secondary money market can perceive the larger rate drop may be inflationary, since the US economic numbers are still solid.
The Fed already conveyed that they would be eliminating the Quantitative Tightening early. But what they’re doing is as bonds and mortgage backed securities are being paid off, or maturing, they are buying more notes and bonds, but not mortgage backed securities. What that’s doing is dropping the US securities, but not mortgage backed securities. Thus the mortgage rates haven’t dropped as much as the US securities.
More wild cards: President Trump giving the Fed more grief for ramping up the rates prematurely, the upcoming election, BREXIT, trade tariffs, Fed Chair Powel speaking at the Jackson Hole Conference this week…
Stay tuned. This interest rate soap opera has been going on since last October, but is just now hitting the international news.
If you have any questions how this might affect you, or discuss strategies, give me a call.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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