Mortgage Biz Focused On Upcoming Fed Meeting


Merriam-Webster says the phrase “kick the can down the road,” derived from an old children’s game, first entered the American political lexicon in the mid-1980s, about 40 years ago.

It may have seemed like 40 years, but it will be just one, come July – at least – since the Federal Reserve Board will have last budged its federal funds rate with all indications pointing to the range remaining the same, at 5.25% to 5.50%, when the Federal Open Market Committee concludes its next meeting this Wednesday.

CME Group’s FedWatch tool places the probability that the rate will hold steady at 99.4%, followed by a 91.1% chance of staying the same at the meeting scheduled to conclude on July 31.

With only three FOMC meetings left in 2024 after that, it appears time to wave goodbye to Fed officials’ once-rosy prediction of three rate ramp-downs this calendar year.

Yet as for this week, the announcement coming Wednesday afternoon that will wrap up the two-day FOMC summit lands on the same day as the release of new inflation data – which Fed Chair Jerome Powell undoubtedly will reference in his remarks.

Inflation has indeed been the driver of all decisions the Fed has made since first beginning to hike its key rate from near zero in early 2022. The goal is 2%, a number that is not yet comfortably in sight.

But even that may not be the primary concern as we head into the summer, according to Troy Williamson, senior loan officer with Cornerstone Home Lending in Wilmington, N.C.

“At this point the Federal Reserve appears to be focusing less on inflation numbers and looking more strongly at the labor market,” Williamson told The Mortgage Note last week. “We have seen some recent employment-related information over the last couple of weeks that could potentially give the Federal Reserve justifiable reason to look at lowering the Fed funds rate sooner than later. But we feel that they are going to have to see a more considerable ‘softening’ in the labor market before making any definitive decisions about monetary policy moving forward.”

Given that stalemate, what experts and investors are now looking for in the Fed’s assessments of the current economic state is not necessarily whether the target range will budge (as that has become increasingly unlikely over the past year) but all the ancillary information, statistics, and speculation Powell presents.

“The statement at the culmination of their last few meetings continues to indicate that they will be ‘data dependent’ when making decisions moving forward, and we anticipate their next statement being much of the same,” Williamson said.

For proof of this, look no further than some of the other headlines previewing this week’s meeting.

“With no rate cut expected, here’s what to watch at June’s FOMC meeting,” says Forbes.

“Fed won’t move interest rates this week, but (the) meeting will still be a feast for economists,” blares the MarketWatch version.

No shame in leading with the bad news if everyone knows it’s coming, apparently.

Mortgage rates, meanwhile, are a mix of good news and bad news at this point. Though both 15- and 30-year rates had dropped recently, they’ve now leveled off, according to HousingWire.

And both remain noticeably above where they were one year ago.

That said, the boomerang switches back to good news when you consider the spreads in the 10-year Treasury yield are better at this point of 2024 than they were in 2023.

What the Fed does to its key interest rate does not automatically orchestrate mortgage rate movement, but the two are interconnected, and the stagnation for one ultimately spells disappointment for the other, according to Williamson.

“With inflation appearing to be somewhat stuck at current levels with no significant movement lower and with conflicting employment-related information, they (the Fed) are likely going to need to see more significant changes to move the needle,” he said. “I believe that most of the industry believed that we would see a more substantial move lower in mortgage rates by this point in 2024. Unfortunately, recent economic data has not been friendly to mortgage rates, and we believe it will likely be the beginning to middle of 2025 before we see any meaningful movement lower.”

To say nothing of home-buying activity, what can you do right now to put yourself in the best position if you already own a home? CBS News MoneyWatch offered three tips last week: locking in your rate for a home equity loan before it potentially rises, using the equity you have accrued to pay off debt, and limiting your borrowing.

On the contrary, the same article recommended against shopping around for lenders at this time and warned it is not the right time to open a HELOC, or home equity line of credit.

Whatever the FOMC decides, and whatever data Powell elects to emphasize in announcing the committee’s course of action, The Mortgage Note will be recapping all of Wednesday’s developments on Thursday morning, so stay tuned.

Read More Articles:

What Does The 2024 POTUS Race Mean For Commercial Real Estate Market?

CFPB Launches Inquiry Into Mortgage “Junk Fees”

NAR’s $418 Million Settlement: Where Are We Now?

Sign up for our free newsletter.