{"id":1236,"date":"2023-09-30T23:26:32","date_gmt":"2023-09-30T23:26:32","guid":{"rendered":"https:\/\/www.mikeclover.com\/blog\/?p=1236"},"modified":"2023-09-30T23:26:32","modified_gmt":"2023-09-30T23:26:32","slug":"what-happens-next-with-interest-rates","status":"publish","type":"post","link":"https:\/\/www.mikeclover.com\/blog\/2023\/09\/30\/what-happens-next-with-interest-rates\/","title":{"rendered":"What happens next with interest rates?<\/strong>"},"content":{"rendered":"\n

What happens next with interest rates?<\/strong><\/p>\n\n\n\n

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Anyone wanting to buy a house with a home mortgage loan right now is wishing interest rates would come down. But is that likely to happen? And if so, when?<\/p>\n\n\n\n

People are also wondering: \u201cWhy have mortgage interest rates increased so much in 2022 and 2023?\u201d<\/p>\n\n\n\n

Because inflation has been raging. In response to that, the Fed raised interest rates to bring it under control.<\/p>\n\n\n\n

The thirty-year mortgage interest rate hit 7.2% in August, 2023, marking the highest rate in more than 20 years. This was done purposely to rein in spending. When there\u2019s less spending, inflation cools.<\/p>\n\n\n\n

Thinking back: Following the global financial crisis, rates were dropped to stimulate the economy. Now it appears to been over-stimulated, possibly by the \u201cstimulus money\u201d and abundant unemployment benefits that were distributed to citizens in response to the pandemic shutdowns. This influx of money, together with increased fuel prices, brought about inflation. Now interest rates have been raised higher than anticipated because the increase has not been working as well as expected.<\/p>\n\n\n\n

Housing has taken a severe hit, but other sectors of the economy have been slower to respond. Many financial experts believe that household savings and a greatly increased use of credit card debt has kept other spending moving along. That should change over the coming months, when we\u2019ll see a sharp drop in spending in other parts of the economy.<\/p>\n\n\n\n

What about the yield-curve inversion?<\/strong><\/p>\n\n\n\n

First, what is a yield-curve inversion? It is the situation that comes about when short-term (2 year fed-funds) bonds yield a higher rate than long-term (10 year Treasury) bonds.<\/p>\n\n\n\n

I expect the current situation to hold steady as long as the yield-curve inversion holds.<\/p>\n\n\n\n

Will interest rates fall?<\/strong><\/p>\n\n\n\n

Hopefully, the last rate hike was in July. Then, again hopefully, the Fed will begin cutting the fed-funds rate after its first 2024 meeting in February.<\/p>\n\n\n\n

An inflation rate of 2% is the goal. When that happens, which they hope will be by the end of 2025, the concern will shift to shoring up economic growth. At that time, we expect to see the 30-year home mortgage rate drop to about 4.5%. So far, the average for 2023 is 6.75%.<\/p>\n\n\n\n

As for inflation\u2026<\/strong><\/p>\n\n\n\n

Many of us do expect inflation to drop drastically. In fact, it may well fall below the target of 2% and average only 1.8% from 2024 through 2027.<\/p>\n\n\n\n

Since everything is tied together, the GDP is also affected by interest rates.<\/strong><\/p>\n\n\n\n

We believe that if the fed shifts to easing the rates by the end of this year, the GDP should start to accelerate in 2024 and 2025. Of course, if that doesn\u2019t happen, then we\u2019ll see the fed raising rates higher than we expect in order to cause a short-term recession.<\/p>\n\n\n\n

Housing is a major component of the GDP, and is the most interest-rate sensitive. Thus, we\u2019re hoping to see lower rates in order to enable more consumers to obtain mortgages.<\/p>\n\n\n\n

It\u2019s a tough call for many consumers, since higher interest rates may lessen demand and thus reduce home prices in some markets. The question for them will be \u201cDo I buy now and refinance when interest rates drop, or should I hold off because prices will come down and I could get stuck with an upside-down mortgage?\u201d<\/p>\n\n\n\n

Looking to the future, we\u2019re choosing optimism\u2026<\/strong><\/p>\n\n\n\n

We believe the fed funds rate will fall below what many investors are expecting, and we believe inflation will fall faster than the Fed expects. If we\u2019re right, then the Fed will cut interest rates more than current projections would indicate.<\/p>\n\n\n\n

Following rate cuts, we expect to see GDP growth.<\/strong><\/p>\n\n\n\n

This should begin to happen approximately 9 months from now and continue on into 2025, 2026, and 2027. As supply constraints ease, the GDP should grow without triggering inflation again. We expect to see about 3% more growth than the consensus of opinion expects.<\/p>\n\n\n\n

While we are still experiencing shortages in durable goods, energy, and automobiles, we believe those shortages could shift into gluts in just a few years. If we\u2019re right, inflation will fall.<\/p>\n\n\n\n

What does the future hold for interest rates?<\/strong><\/p>\n\n\n\n

Right now, the forecast is focused on the Fed and what it will or won\u2019t do to reduce inflation. That\u2019s the short run.<\/p>\n\n\n\n

In the long run, the Fed will be less important and interest rates will be determined by other aspects of the economy. For decades, forces such as age demographics, productivity growth, and economic inequality have played a role by creating an excess of savings over investment. These forces haven\u2019t gone away. They\u2019ve simply taken a temporary back seat to more forceful and chaotic forces.<\/p>\n\n\n\n

The tide will turn, and we believe interest rates will come down and stay down for quite some time.<\/p>\n\n\n\n

For the lowest home mortgage rates available in Texas today\u2026<\/strong><\/p>\n\n\n\n

Contact Homewood Mortgage, the Mike Clover Group<\/strong>. We have a well-deserved reputation for fast, friendly service, combined with some of the lowest rates and best terms available anywhere in Texas.<\/p>\n\n\n\n

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What happens next with interest rates? Anyone wanting to buy a house with a home mortgage loan right now is wishing interest rates would come down. But is that likely to happen? And if so, when? People are also wondering: … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/1236"}],"collection":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/comments?post=1236"}],"version-history":[{"count":1,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/1236\/revisions"}],"predecessor-version":[{"id":1237,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/1236\/revisions\/1237"}],"wp:attachment":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/media?parent=1236"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/categories?post=1236"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/tags?post=1236"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}