No surprises at the Fed’s September 26th meeting. A quarter percent rate hike was announced. This is the eighth such interest rate hike since late September 2016. The Fed also indicated that more interest rates would be forthcoming.
On one hand, a hike on interest rates can be seen as a pat on the back for a healthy economy…low unemployment levels, solid GDP numbers, strong stock market, etc. On the other hand, what about sluggish if even-existent wage growth, global trade concerns, higher costs of borrowing, etc.
According to the latest US economics data from Capital Economics, rising interest rates are expected to slow consumption and investment growth in remaining 2018 and 2019. Capital Economics also anticipates two more rate hikes in 2018 and two more in 2019.
As it is, increased market interest rates, despite remaining historically low, are already contributing to high borrowing costs for households and businesses. The housing industry is in the crossfires. Building permit figures are weak and existing home sales are declining.
Freddie Mac’s latest Primary Mortgage Market survey recently indicated that mortgage rates have increased for the fourth straight quarter.
According to Sam Khater, Freddie Mac’s chief economist, “Mortgage rates are drifting upward again and (this increase) represents continued affordability challenges for prospective buyers, especially first time buyers.”
Goldman Sachs predicts a significant increase in interest rates…an increase of 5.5% by 2019…in its latest report. Reuters also points out that mortgage rates may climb 50 basic points due to the higher costs of compensating private sector guarantors of Freddie Mac loans.
All in all…be ready and on your toes, agents.