As we get set to close out Q1 of 2022 the year has started off much as we expected.
- Volatility in rate markets
- Inflation reaching the highest levels in nearly 40 years
- 10-year treasury note breaking 2.0% for the first time since 2019
All of this has caused mortgage rates to also reach the highest levels that we’ve seen since 2019, but as I noted in January sometimes known volatility is better than unknown volatility.
With all of this in play, the Fed is set to meet this week and we fully expect them to start “hiking rates” which means the Fed Fund Rate and the Prime Rate.
However, as we’ve commented on before, I don’t necessarily think this means mortgage rates go up with them since the Fed’s motive for “rate hikes” is to counteract inflation.
Inflation is the nemesis of mortgages so if the Fed’s Plan works, we could see a little movement for the better on mortgage rates.
The one thing we didn’t predict was Russia waging war on Ukraine!
With many Russian Banks being removed from the SWIFT payment system, the Ruble has moved 30% lower against the dollar and we’re seeing run-on Banks…where citizens are flocking to ATMs to try and pull out money and put it into US or Euro-denominated assets.
Russia is trying to prevent the exodus by raising its Central Bank rate from 9.5% to 20% overnight!!!
Think about this, our Fed Fund rate is at 0.08% with a target of 0.00 to 0.25% (as I write this newsletter) with expectations of it being moved from 0.25% to 0.5% in March.
In January, I said I felt that February is when inflation would reach its peak and that if mortgage rates were in the mid to upper three-percent range at the end of March, I’d be happy. Rates are bouncing back and forth in this range right now and after the Fed’s announcement on hiking rates, we’ll see how markets react.
If the Fed can truly counteract inflation with their policy changes, we may see another bite at the apple later this year. While this is possible, it’s not a guarantee, which is why our advice will remain the same for any other month.
If you find the right home at the right price or can refinance and save money, there doesn’t appear to be a better time than now in the short term.