📰 What you're hearing in the news...
The Consumer Spending Reports are in: Inflation went up from 3.4% to 3.5%. Doesn't sound like a lot BUT this was BAD for everyone who was hoping it was going to go down.
Why? Because if inflation was going down, then the hope was that we would see a drop in interest rates (not only for credit cards but for mortgages) in the next few months.
🏛️ A little Background on CPI & Inflation:
Every month, analysts look at the Consumer Price Index (CPI) to see how much Americans are paying for key items: Food, Gas and Energy, Clothing, Shelter (rent & housing), Insurance and more. They issue a report with their findings based on a 12 month average looking for trends (aka the Consumer Spending Report). When the trend shows that people are paying MORE for the SAME amount of something - that's inflation. So, for example, if last month's report showed people paying an average of $4.00 per gallon of gas and this month, the price went up to $4.39/ga - this signals that inflation is rising.
📈 Why does inflation matter to interest rates?
Interest Rates are dependent on the economy, inflation and affected by decisions made by the Fed. The Federal Reserve Board (Fed) monitors various factors with the primary goal to reduce inflation. Every week, reports are released that the Fed considers to see that the economy is healthy and inflation is under control. These reports included the Consumer Spending Report, the Jobs Creation Report, Wage Growth, Unemployment and Retail Sales.
Because of negative reports, the Fed Board made several rate hikes in 2022-2023 which is why mortgage rates went from 4% to currently hovering around 7.25%.
💰 The Million Dollar question...will rates go down?
The Fed Board has been saying that if inflation goes down and jobs are being created at higher wages, they would consider lowering rates in June.
Our status so far...
Inflation was down before (good) - now it's nudged up in this report (bad)
Wages for jobs being created were much lower than desired (bad) - now we are waiting on the next report
The Jobs report was good last time (good) but there were concerns that the majority of the jobs were minimum wage (not good) - now we are waiting on the next report
💭 My Thoughts:
There is ALOT of negativity flying around in the news and among some economists with downright depressing predictions. It was so bad that even one of the Federal Board members released a statement yesterday telling "media & experts" to calm down. One report is not the only indicator and there are so many events that can occur that will influence their decisions. I still believe we are through the worst of it and, along with many of the experts, believe that there is a strong chance we will see our first rate cut by July.
So, instead of focusing on the doom and gloom – let’s look for the silver lining to move forward…
🏡 If you want to purchase a home – Don’t give up! There are several programs currently available for as little as 3% down payment. Many are priced for a half % lower than the going rates. You do not need to be a first-time homebuyer or have a low income to qualify! Let’s chat!
💳 If you currently own a home but are struggling with the higher credit card debt payments as well as higher gas prices at the pump, we should chat and run the numbers as to whether a refinance at 7-7.5% would keep your monthly debt manageable and save you $$ in payments. Remember, you can refinance when rates come down. Continuing to get into more debt just to preserve a low mortgage rate may not be as financially smart as you think. Let’s chat!
- Toni
And of course, you can always ask me questions at toni (at) toniryan.com
ABOUT THE AUTHOR
Toni F. Ryan | NMLS#230507
Senior Loan Officer | Peak Residential Lending
Toni F. Ryan has over 25 years experience in mortgage lending - both on the wholesale and retail levels. She believes that education is key to making the best decision for YOU! She shares her insight into the lending world here and encourages your feedback. Don't forget to connect on Facebook - Instagram and TikTok