Rising interest rates

Mortgage Interest Rates Just Jumped Over 7.5%

Inflation News Is Bad News For Home Buyers

What just happened?

Mortgage interest rates rose above 7.5% Thursday on the release of the PCE price index component of Q1 GDP.  As Matt Graham of Mortgage News Daily reports;

“GDP itself was weaker than expected, but even that was explained away by components not related to private domestic consumption.  Focusing on the latter makes Q1 look just as strong as any of the past few quarters.  PCE did the most damage for two reasons.  It was MUCH higher than expected (3.7 vs 3.4) and that implies tomorrow’s PCE data (a monthly version of today’s quarterly report) is also at risk of coming in higher than expected.”

Thursday’s quarterly report was released ahead of the monthly data because a new quarter was being reported. The data showed a surprising surge in inflation. Friday’s monthly inflation report is now expected to bring more bad news, squashing any serious consideration of rate cuts, possibly for all of 2024.

The avg. 30-year US mortgage rate rose for the fourth straight week to its highest level since November 2023.

Mortgage rates jumped an eighth of a point on GDP news, bringing the top tier conventional 30-year rate index over 7.5% for the first time since November 13th 2023.

inflation is trending in the wrong direction

Thursday's Inflation Rate

The current inflation rate is 3.48%, compared to 3.15% in March, 3.15% in Feb., and Jan.’s low of 3.09%. The four-year low was in June 2023, when the inflation rate dropped to 2.97%. 

MarketWatch’s Steve Goldstein quotes David Donabedian, CIO of CIBC Private Wealth, who said Thursday’s GDP report showing slower-than-expected growth and higher-than-expected inflation was “the worst of both worlds.” 

FHN Financial’s Chris Low points out; “Consumption is more tenuous than even the weak numbers suggest” because growth came from services. “In this report it’s just an estimate built off employment data.”

Paul Davidson of USA Today: “The recent price acceleration largely centers on a few categories, such as rent, car insurance and medical care. While some economists say the cost of such services will continue to rise sharply in 2024, others expect a slowdown that could still allow the Federal Reserve to lower interest rates more than markets now anticipate.”

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