Eave’s “Just the Facts” is a weekly series designed to cut through the noise about home loan interest rates for borrowers and real estate professionals. Eave doesn’t try to play the role of forecaster, who claims to have some special insight. Few do! Instead, our Chief Credit Officer covers what happened in the market last week.

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Last week brought the much anticipated Federal Open Market Committee (FOMC) meeting that decides the short term interest rate policy. They (the Feds) hiked the federal funds rate (FFR) by a quarter point. As previously expected, they signaled that they continue to expect to hike the Federal funds rate two more times before the end of the year. The Federal Funds Rate is the beacon for most other interest rate movements, including mortgage rates. The Feds reaffirmed that economic expansion activity and inflation is on pace with their expectations. Consequently, the rate hikes for 2018 are warranted to keep the economy steady. As we covered in an earlier post, interest rates affect borrowing for reinvestment in economic activity. If there’s too much economic activity, it can increase prices and make essentials costly for everyone. Therefore, the feds hiking interest rates to keep a check on over-exuberant economic growth or out-of-control inflation is a good thing.

Economic data from the month of May confirmed that economic activity remains robust.

A. Retail Sales – a proxy for consumer spending ticked up in May.

 

B. Inflation metrics ticked up higher, too. This is in line with an elevated trend line. For instance, the Sticky Price Consumer Price Index rose above last year’s levels by more than 2.5%. The Sticky Price Consumer Price Index is calculated from a subset of goods and services that change price relatively infrequently. Because these goods and services change price relatively infrequently, they are thought to incorporate expectations about future inflation to a greater degree than prices that change on a more frequent basis.  

The rate hike was warranted because these economic metrics moved in the same direction as Fed expectations.

Our Updated Jumbo Rates * (as of 06/18/2018)

Now that the fed rate decision is behind us, the market indexes calmed down a bit – so rates went down 1/8th of a percent (0.125%) across the board.

5/1 ARM – 4.125% Interest Rate, 4.751% APR
7/1 ARM – 4.250% Interest Rate, 4.710% APR
30yr FRM – 4.625% Interest Rate, 4.698% APR

 

* This estimate is informational only. It is not a commitment to lend. To apply for a loan, you’ll need to complete an application and provide additional information. Final approval of your loan is based on verification of your meeting the necessary underwriting criteria and property approval. The estimates for fees and other charges are not intended to be accurate until you have chosen a property and settlement service providers. Rates are estimates. Your final rate, loan product, and terms may be different. Normal credit qualifications and other terms and conditions apply. Products, rates and terms are subject to change unless product has been selected and rate has been locked after you have chosen a property.