Mortgage rates rise to 7% after Powell’s speech
Jerome Powell, the chairman of the Federal Reservesaid Thursday that the U.S. economy is “not sending any signals that we need to rush to cut interest rates.” This statement was enough to push mortgage rates to even higher levels, a sharp departure from the optimism lenders experienced during the September rally that now seems like a distant memory.
“We are shifting policy to a more neutral setting over time. But the path to get there is not set in stone,” Powell said in a speech on the economic outlook in Dallas. “The strength we see in the economy right now gives us the opportunity to approach our decisions carefully. Ultimately, the path of policy rates will depend on how incoming data and the economic outlook evolve.”
Considering the Fed’s dual mandate, inflation is moving closer to the 2% target, but “it’s not there yet,” Powell said. Data released this week shows personal consumption spending rose 2.3% in the 12 months ending in October, and 2.8% when excluding volatile food and energy categories.
Meanwhile, the labor market “is now back to more normal levels by many measures consistent with our employment mandate,” Powell said. He added that the unemployment rate of 4.1% is “significantly higher than a year ago, but has leveled off in recent months and remains historically low.”
Traders have reversed their bets on a rate cut in December. Before Powell’s comments, the CME Group’s FedWatch tool showed that 72% of interest rate traders expected officials to cut rates by 25 basis points, which was reduced to 58.7%. Those expecting interest rates to remain at the current target range of 4.5% to 4.75% went from 27.8% to 41.2%.
Financial markets reacted quickly to Powell’s comments, with stocks taking a hit and Treasury yields rising. The US 10-year yield rose to 4.450% on Thursday.
The thirty-year mortgage rate, which correlates with long-term government bonds, rose to 6.97%. HousingWire‘s Mortgage Rate Center, up from 6.94% on Monday. Bee Mortgage news dailyprices stood at 7.02% on Thursday afternoon.
For mortgage lenders, “the upward movement in mortgage rates is putting the mini-refi rally we saw in September on ice for the time being,” said Derek Sommers and John Hetch, equity analysts at Jefferies, This was stated in a report on Friday.
During the third quarter, as mortgage rates rose toward 6%, production volumes rose 17% quarter-over-quarter for seven companies the analysts covered – Guild Mortgage, Rocket mortgage, United Wholesale Mortgage, loanDepot, Mr. Cooper, Onity group And Pennymac financial services. Origination segment profits rose 126% in the quarter “with some meaningful gain on sales margin.”
“Unfortunately, mortgage rates rose to around 7% after the end of the third quarter, which dampened the recovery in new production volumes,” Jefferies analysts said. “A mortgage rate between 6.00% and 6.25% is what is needed to stimulate refinancing activity in the current environment.”
