The Federal Reserve meets this week to decide whether short-term interest rates need to be lifted again or can remain at their present levels for a while longer. To be sure, few expect that a hike will come, and federal funds futures markets only place about a 3% chance that one will occur at the close of the meeting on Wednesday.
However, that doesn't mean the Fed's more staccato pace of rate increases is necessarily at an end, or that the skip-a-meeting pace for rate increases seen this year won't continue. The odds of another increase before the year has come to a close remains more than minimal, with upwards of a 40% chance of one before the calendar flips to 2024.
Mortgage rates spending the last five weeks above the 7% mark and with the summer housing market coming to an end, applications for mortgages have very little traction. The Mortgage Bankers Association's weekly survey reported a 0.8% decline in requests for mortgage credit in the week of September 8; surprisingly, applications for purchase-money mortgages managed a 1.3% increase, which of course was overwhelmed by a 5.4% drop in requests to refinance existing loans. If nothing else, loans being made today to homebuyers will be ripe for refinancing even with fairly small declines in rates, and there will likely be quite a few new homeowners who will be prepared to jump in even if mortgage rates only make it back to levels seen at the beginning of this year.
That won't be this week, though. All investor's eyes again turn toward the Fed, whose two-day meeting dominates the calendar. While the outcome seems pre-determined -- that is, no increase in rates -- we'll be paying close attention to the SEP and any change in member outlooks. That, and the post-meeting press conference will provide fresh clues as to the direction for mortgage rates as we head deeper into the fall, and perhaps even into the holiday season. A light calendar of economic data next week does feature some housing updates, but based on how yields moved last week, it looks like mortgage rates will be steady to perhaps just slightly firmer this week. We'll call it a two or three-basis point increase in the average offered rate for a conforming 30-year FRM as reported by Freddie Mac Thursday.