Market Update - August 18, 2023

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This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.

Rates are provided by Housing Wire in conjunction with Optimal Blue. Rates are updated in real-time. Optimal Blue data is calculated using actual locked rates with consumers across 42% of all mortgage transactions nationwide. Rates are inclusive of locks that occur below par, at par and therefore consider discounts and rebates.

For the week of Aug 11th – Aug 18th, 30-year and 15-year interest rates increased to the highest level of 2023. According to the FOMC minutes from this past fed meeting, Fed officials have noted "upside risks" to inflation, possibly leading to more rate hikes.

Federal Reserve officials expressed concern at their most recent meeting about the pace of inflation and said more rate hikes could be necessary in the future unless conditions change. This discussion during a two-day July meeting resulted in a quarter percentage point rate hike that markets generally expect to be the last one of this cycle.

However, many analysts still predict the intermediate and long-term trajectory shows a downward trend in rates.  For example, Goldman Sachs analysts expect the FOMC will begin its rate cut cycle by the end of June next year with a 25bps cut. Further rate cuts will follow from there at a gradual pace, likely to be once per quarter.

Mortgage Rate Forecast:

30 Year Fixed Rate Forecasts for late 2023 and 2024

Fed Watch:  Looking ahead, all eyes are on the upcoming September 20th Federal Open Market Committee (FOMC) meeting. According to the CME Group, 11.5% of forecasters predict an increase in interest rates, while 88.5% predict rates will remain the same. None of the forecasters expect rates to decrease.

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Market Review:

  • Per Black Knight's Production Metrics, the breakdown of mortgage production volume is as follows: 82.50% for purchase transactions, 14.97% for cash-out refinances, and 2.54% for rate and term refinances.
Per Black Knight 54.57% of all Retail loan production were Government Loans (FHA, VA, USDA), while 45.42% were Conventional and Non-Conforming loans.

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