It’s Fed Week — and after Friday’s hotter-than-expected core CPI reading, markets are already pricing in the Fed raises rates by 25 basis points on Wednesday. In this week’s update, I cover last week’s inflation and housing data, where mortgage rates stand today, the full economic calendar, and a couple of strategies worth considering if you’re shopping for a mortgage in this environment.
Recap From Last Week
Last week’s inflation report gave us a mixed picture. Consumer prices rose 0.4% for the month, driven mostly by higher gas and energy costs, while annual inflation held steady at 3.4%. On the brighter side, core inflation — which strips out food and energy — dropped to 2.4% year-over-year, its lowest level in more than five years.
Wholesale prices came in mostly as expected, though both headline and core numbers ticked up on an annual basis.
Why does this matter to you? The Federal Reserve watches inflation closely when deciding on interest rates, and recent comments from Fed officials suggest this data will weigh heavily on their next move. We’ll get that answer Wednesday, when the Fed announces its rate decision.
On the housing side, existing home sales fell 2% from July to August — the third straight monthly decline, putting sales at a seasonally adjusted annual rate of 3.98 million homes, about 1.2% below last August. At the same time, inventory keeps building: available homes rose 3.2% from July and are up 5.9% from a year ago.
NAR’s Chief Economist Lawrence Yun points out that mortgage rates and home sales tend to move in opposite directions, so this slowdown isn’t a huge surprise given where rates have been. Still, sales remain up 1.6% for the year so far.
And heading into this week, oil prices are climbing due to rising tensions tied to the war in Iran — and that’s putting some upward pressure on mortgage rates.
Optimal Blue Rate Index
According to the Optimal Blue Mortgage Market Index, the average 30-year fixed rate as of last Friday, September 11th, was 6.945% — and rates have been trending higher since the start of the month.
A quick reminder: this index reflects about 35% of mortgage transactions nationwide from lenders who use Optimal Blue — it’s not a rate quote. You can’t lock in last week’s rate today, and factors like your credit score and loan-to-value will affect what you personally qualify for. If you would like to see what current mortgage rates look like based on your personal scenario, let’s talk!
Economic Calendar
It’s Fed Week. The odds currently favor a 25-basis point rate increase, with CME Fed futures putting the probability at 92.7% — that’s following Friday’s hotter-than-expected core CPI reading. Although the Fed does not directly control mortgage interest rates, the markets do react to the anticipated increase. If you have a Home Equity Line of Credit or other debts that are attached the the Prime Rate, your interest rate will follow what happens this Wednesday with the Fed Funds rate.
Here’s what’s ahead:
- Monday — No major economic news
- Tuesday — ADP Weekly, Empire State Manufacturing Index
- Wednesday — Retail Sales, NAHB Housing Market Index, Fed Rate Decision
- Thursday — Jobless Claims, Housing Starts/Permits, Pending Home Sales
- Friday — Industrial Production
MBS Highway — Where Mortgage Rates Stand
As of just before noon, the markets look fairly flat today, but the red candlesticks from this past week on MBS Highway tell the story — mortgage rates have been moving higher.
That’s largely due to rising oil prices, higher yields on U.S. Treasuries, and continued uncertainty around the Strait of Hormuz.
In the Spotlight: Strategies for a Higher Rate Environment
Let’s talk about a couple of strategies that can help right now.
First, adjustable-rate mortgages have actually been improving in pricing lately. For a while, ARMs weren’t offering enough of a rate advantage to make sense compared to a long-term fixed rate — but recently, when I priced out some scenarios, I was pleasantly surprised to see the 5-year and 7-year ARMs coming in with better pricing and lower rates.
If you’re considering an ARM, it’s important to understand how it works — and your overall financial picture, including your comfort with risk, should factor into that decision. If you’re planning to refinance within five years, or you’re comfortable with the possibility of a higher rate after the fixed period ends, it may be worth a look. As always, it’s worth reviewing all your options so you can make the choice that’s right for you.
Second, interest rate buydowns are another way to bring your rate down. Instead of asking a seller to lower the sales price, you can negotiate for them to buy down your interest rate instead — and more often than not, that approach lowers your monthly payment more than a price reduction would. Just be sure to check with your lender first, since there are limits on how much a seller can contribute depending on your loan type and down payment.
Questions About Your Scenario?
If you have questions about your specific situation — whether you’re buying, refinancing, considering a reverse mortgage, or just want to understand your options — I’d love to hear from you.
About Rhonda Porter
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