Mortgage Minute brought to you By Geneva Financial Jun 15 2023

The housing market is currently experiencing some instability among lenders, particularly in the wholesale sector, due to fluctuations in bond prices. Speculation about a potential recession, the Federal Reserve's actions to combat inflation, and interest rate hikes are creating uncertainty. It's important to note that interest rates are not expected to decrease significantly in the near future, unless there are signs of weakness in the labor market.
Despite concerns, the economy continues to show resilience, as indicated by positive retail sales figures and the European Central Bank's decision to raise rates. Bonds have managed to perform relatively well despite these developments.
Regarding the Federal Reserve, they decided to pause their rate hikes in June after a series of consecutive increases. However, they left the possibility open for future hikes as early as July, with most policymakers believing that further rate hikes are necessary to control inflation.
Initially, the reaction to the Fed's decision was unfavorable for interest rates, which worsened during Fed Chair Jerome Powell's press conference. However, by the end of the day, bond prices had recovered, resulting in a slight improvement. Although some lenders had already adjusted their rates for the worse, if the gains persist, we can expect more favorable rates compared to the reprices.
In summary, interest rates are not currently expected to change significantly. If there are indications of a weaker economy and labor market, rates may improve slightly. However, if the market believes that the Fed will continue raising rates, then rates will likely increase.
For individuals with loans closing in less than 15 days, it is advisable to cautiously float, as the situation remains uncertain. Keep an eye on the market but avoid panicking.
For loans closing in 15-30 days, cautiously floating is also recommended. It is important to identify favorable opportunities to lock in a rate, as significant drops in rates are unlikely but some days may present better locking options than others.
For loans with 30+ days until closing, there is less immediate concern. The sentiment in the market can change over the next few weeks, but currently, there is no imminent risk of drastic rate increases.