Dar-Mardan-Realtor-CPA
New member
Today, on July 12, 2023, the annual inflation report revealed that inflation has hit 3%. This may appear as an abstract figure to some, but this is fantastic news for anyone who owns a loan - be it for a car, a home, or prospective buyers and sellers. Allow me to explain the implications of this development.
Over the past year, the Federal Reserve has been continuously hiking interest rates, aiming to trim inflation down to below 4%. Their ultimate target is to bring inflation to under 3%, and this is the first time in over a year that we've managed to see inflation round out at this figure. This outcome sends strong signals to the Federal Reserve that in the following months, they might halt their rising interest rates and eventually reduce them.
But that's not all; there's even more positive news on the horizon in the short term.
As we've discussed previously, mortgage rates are closely linked to the 10-year treasury rate, which currently stands at 3.865%. You can typically rely on various mortgage programs to begin at the 10-year treasury rate for one or three-year adjustable-rate mortgages (ARMs). The rate for a 30-year fixed mortgage is usually 150 basis points higher than the 10-year treasury rate. Given this context, the short-term mortgage rates could be between 3.9 to 4.5%, and the 30-year fixed rate could be slightly above 5%.
However, what we've seen over the past year, due to the Federal Reserve's assertive approach in increasing the interest rates, is that the premium added to the 10-year treasury rate has shot up to 300 basis points. This is why the current mortgage rates hover between 6.5 to 7%. Once the market stabilizes, and the Federal Reserve declares a halt on increasing rates, the risk associated with mortgage lending will reduce. Consequently, we can anticipate mortgage rates to revert to their historical trend of being more aligned with the 10-year treasury rate.
As we start to see this trend emerge, more homeowners will be encouraged to put their houses on the market. This is because they now have an alternative - to sell their existing property and buy a new one, given the significantly lower mortgage rates compared to today's hyper-inflated mortgage rates.
The latest inflation report paints an encouraging picture for borrowers, the housing market, and the overall economy. The lower inflation figures are a positive step forward in the path towards greater market stability and affordability in lending.
About the Author
Dar Mardan, a seasoned realtor at Pacific Sotheby's International Realty, is your guide to all things real estate in sunny Orange County. With an emphasis on informed decisions and an array of knowledge spanning real estate, tax strategies, trusts, and more, Dar turns learning into an adventure. Alongside his talented wife, Vida, they offer a comprehensive, personalized approach to serve clients' real estate needs. Trust Dar and Vida to turn your real estate dreams into an extraordinary reality!
Over the past year, the Federal Reserve has been continuously hiking interest rates, aiming to trim inflation down to below 4%. Their ultimate target is to bring inflation to under 3%, and this is the first time in over a year that we've managed to see inflation round out at this figure. This outcome sends strong signals to the Federal Reserve that in the following months, they might halt their rising interest rates and eventually reduce them.
But that's not all; there's even more positive news on the horizon in the short term.
As we've discussed previously, mortgage rates are closely linked to the 10-year treasury rate, which currently stands at 3.865%. You can typically rely on various mortgage programs to begin at the 10-year treasury rate for one or three-year adjustable-rate mortgages (ARMs). The rate for a 30-year fixed mortgage is usually 150 basis points higher than the 10-year treasury rate. Given this context, the short-term mortgage rates could be between 3.9 to 4.5%, and the 30-year fixed rate could be slightly above 5%.
However, what we've seen over the past year, due to the Federal Reserve's assertive approach in increasing the interest rates, is that the premium added to the 10-year treasury rate has shot up to 300 basis points. This is why the current mortgage rates hover between 6.5 to 7%. Once the market stabilizes, and the Federal Reserve declares a halt on increasing rates, the risk associated with mortgage lending will reduce. Consequently, we can anticipate mortgage rates to revert to their historical trend of being more aligned with the 10-year treasury rate.
As we start to see this trend emerge, more homeowners will be encouraged to put their houses on the market. This is because they now have an alternative - to sell their existing property and buy a new one, given the significantly lower mortgage rates compared to today's hyper-inflated mortgage rates.
The latest inflation report paints an encouraging picture for borrowers, the housing market, and the overall economy. The lower inflation figures are a positive step forward in the path towards greater market stability and affordability in lending.
About the Author
Dar Mardan, a seasoned realtor at Pacific Sotheby's International Realty, is your guide to all things real estate in sunny Orange County. With an emphasis on informed decisions and an array of knowledge spanning real estate, tax strategies, trusts, and more, Dar turns learning into an adventure. Alongside his talented wife, Vida, they offer a comprehensive, personalized approach to serve clients' real estate needs. Trust Dar and Vida to turn your real estate dreams into an extraordinary reality!
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