08/28/2026
A FED RATE HIKE COULD ACTUALLY LOWER MORTGAGE RATES
Wait…what? 🤔 I know that sounds completely backwards but here is something I think gets lost in all the headlines:
The Fed controls short-term interest rates! Mortgage rates are driven much more by the bond market and what investors think is going to happen to the economy, inflation and future Fed policy.
So, if the Fed raises rates and the bond market believes that move will slow the economy, longer-term rates can actually move LOWER and mortgage rates can follow which sounds like good news, right? Not necessarily.... Because mortgage rates could be falling for the wrong reason and that is what I am watching very closely right now. 👀
The latest PCE inflation numbers showed headline inflation at 3.7% and core inflation at 3.3% year-over-year and both essentially unchanged from the month before. At the same time, consumer spending is slowing and the labor market is already showing signs of weakness. IF you have college students graduating (Which I DO!) you get a front row seat to see the job market. 😡
So, here is my question.... Do we really want to slow an economy that is already losing momentum in an effort to fight inflation that isn't necessarily being driven by an overheated economy?
I want mortgage rates to come down.... but I want them to come down because the economy is getting stronger, and not because the economy is getting hurt. And then there is Reality.... Our Bond markets LOVE bad news- remember Covid? Look what happened to mortgage rates during that time??? We are now paying the price of rates staying low for too long- that is a contributing factor.
The reasons rates move matters. And that's the part of the market I'm watching. 👀
If you interested in learning what RATES are doing for your new Purchase or if you are contemplating a Refinance, let's talk- REAL Talk about what the markets are doing for YOUR home loan.
AI generated Image, some stats taken from MBS Highway but this is my voice talking and not AI! Hope you read to the end and got something out of this weeks market update!
