Hello, hello everybody. Happy Wednesday afternoon. Now I know what you’re thinking. You’re like, man, is it Groundhog’s Day? Is it Monday? No, it’s Wednesday afternoon. I know that these mortgage rate updates typically come your way Monday morning but there was a lot of news that was happening this week.
We wanted to make sure and get it to you after the biggest market moving data of, well at least the most important Fed statement of the last decade got released. The Fed just released their statement, oh, I don’t know, 11 or 12 minutes ago. There’s been a lot of move up in rates lately. We’ve been telling you that mortgage rates have been moving up because of this anticipated inflation in a hotter economy than it’s been. Now again, depending on how vaccine roll outs and everything go, we do face potential headwinds, but the worry has been inflation is going to go too high.
Again, as I tell you every week, inflation is the arch enemy of bonds. If inflation goes up substantially or even more than expected, mortgage rates will move higher. It will not be a good thing for mortgage rates. And so the Fed just announced in their statement that they do see a higher inflation happening. They do think that it’s on the forefront. Now, they also think that it’s temporary. They did not change. They’re still talking about not changing the federal funds rate, the overnight lending rate until 2023. This was important. A lot of people were pricing in thinking that that decision might be baked into a 2022 move. The rate on your credit cards, home equity lines, those things should be staying the same for the next few years. Of course, that doesn’t mean your mortgage rates will because rates will start to move up if the economy heats up. They can also move back down if we hit some headwinds with it as well too.
The most important piece to the Fed statement is that they’re going to continue asset purchases. Now at some point the Federal Reserve has to reduce their balance sheet. At some point the government has to stop spending money. I am not an economist. I just pretend to be one when I talk to you. I did take a few classes, maybe I even majored in it in college. The deal is in looking back in hindsight to what happened in 2009 and the Great Recession, Lehman brothers bailed out and then a few days later, a bunch of other banks were. In hindsight, the government would have bailed out Lehman brothers. They would still exist in some format today. They didn’t do enough quick enough. And so, what the Federal Reserve and what they are trying to do right now with all the stimulus packages passed last year, the stimulus this year, and the Fed continuing these asset purchases is to make sure that they don’t under shoot what’s needed.
They are okay with overshooting a little bit, hitting some inflation, and pulling it back later because we had quite a few years during, after the Great Recession where the greatest concern was deflation. The greatest concern was goods being cheaper tomorrow. Not great for the world to be in that position. We don’t want high inflation, but a little bit is healthy for the economy. That is what they are trying to do. Hey, if you got any questions, hit us up as always. Of course, if you know anybody who needs some mortgage advice, needs help with a loan, needs to buy, needs to refinance. Although rates have ticked up a little bit, it is still an amazing time to buy because prices appear to only be going up in the future and mortgage rates are still outside of the last few months at all time historic lows. I’m Sean Zalmanoff. My team is here to help you. We appreciate you. We appreciate your business, and we appreciate you tuning in to see us. Peace y’all, have a great rest of your day and week.