Dear SAR REALTOR®and Affiliate Members,
Let’s talk about the elephant in the room: while mortgage interest rates have been on a steady, upward trajectory all of this first half of 2022, you have probably noticed that there was a rather abrupt increase in interest rates late last week to early this week. To support our SAR members and to provide some helpful context for how these rate increases may affect your clients –AND our business– tomorrow SAR will email to all members a short video where 2022 SAR Affiliate Chair, Cam Villa, and I discuss just what’s happening in the financial markets, how you may help your buyers navigate rate and payment increases, how you may coach your sellers during this time, what questions you may want to ask loan officers when working with buyers or receiving offers on your listings, and more.
SAR is committed to ensuring our members have up-to-date information, and access to tips and best practices to help you and your buyer and seller clients during this period of rate fluctuation.
Mortgage interest rates fluctuate based on a lot of things, and increase and decrease in reaction to different changes in the financial ecosystem. On Friday, when US Bureau of Labor Statistics released its Consumer Price Index (CPI) inflation data, the actual inflation numbers were significantly higher relative to the forecasted rate of inflation. CPI measured inflation climbed 8.6% in the preceding 12 months through May and a full 1% from April to May, which is a reacceleration of inflation. Yikes…where the ‘market expectation’ was that inflation was stagnating or even decelerating, this news sent financial markets into a bit of chaos based in part on the belief that the Federal Reserve would announce yet another increase in its Fed Funds Rate (the interest rate at which financial institutions lend each other money for liquidity) in order to get inflation more under control.
In reaction to inflation and this speculation the Fed Funds Rate would increase again, stock markets tumbled and different indices measured significant losses — Dow Jones Industrial Average sank around 7% in just the last 5 or so days, and the NASDAQ sank around 8% in the same period. The cascading effect of this news also sent the Universal Mortgage-Backed Security (UMBS) into a tailspin. AND…spoiler alert: mortgage interest rates increased a lot over the weekend from Friday to Monday. Clearly, lenders will offer a variety of loan products with differing rates and terms based on a borrower’s needs and qualifications, but such a sharp increase in mortgage interest rates in such a short period of time is a gut punch to many of our clients as they look to buy or sell property. As I write this, the Federal Reserve is meeting and will announce later today what is anticipated to be a 0.75% increase to the Fed Funds Rate. We shall see…
So stay tuned for an email tomorrow with our informative video, and it will also be posted to SAR’s social media channels as well. We hope you will find the video to be helpful as we navigate this ever-changing environment.