Mortgage rates stayed flat AGAIN while stocks continued to march higher. Higher rates and tariff threats are not stopping investors, especially as a "comprehensive" trade deal was announced last week. However, Powell and the Fed are still holding steady - refusing to cut and waiting to see how the tariffs effect end consumer prices before making their next move. And, "substantial" progress made with China has investors even more excited this Monday.

The average rate on a 30-year fixed rate conventional loan stayed relatively flat at 6.781%  - just slightly up from 6.775% the week before.

BUT, a growing number of our clients are becoming more and more interested in Adjustable Rate Mortgages (ARM) - and for good reason! Clients are shaving more than 0.5% off their rate by opting for a 7/1 ARM (which is a 30 year loan where the rate stays fixed for the first 7 years). In this high rate environment where rates are expected to go down in the near term, an ARMs are very attractive. Want to learn more? Check out our blog post here.

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The Decision (Federal Reserve Edition)

Every six weeks the Fed meets to discuss the fate of the Fed Funds Rate (the interest rate that banks charge each other for overnight loans of their reserve balances held at the Federal Reserve). This rate can dramatically affect all other rates, including mortgage rates, which is why the world hangs on every word Powell says at the conference following each Federal Reserve meeting.

For context, in 2021 -when mortgage rates were sub 3% - the Fed Funds Rate was 0.01%. Today, it's about 4.33%. The more and faster we expect to see the rate cut, the lower we'll see mortgage rates head. Unfortunately for those hoping for lower rates (almost everyone), the Fed basically told us - don't expect a cut any time soon. 

It dashed everyone's hope of a June rate cut.  Following Powell's speech, Investors now betting on less than  0.75% for all of 2025, with the first move starting only in July - and even that seems optimistic. Some believe we'll see just 1 0.25% rate cut this year, unless there's a recession. Right now there's just a 40% chance we'll see a rate cut in July.

Why is Powell talking so bluntly? Well the labor market appears to be just fine and while inflation is low (for now) it could spark at any moment because of the hefty tariffs that Trump imposed on many countries around the globe.

But what's going on with those trade deals Trump's administration keeps mentioning?

Trade Deals Are Here?!

The first trade deal is here. On Thursday, Trump announced a "comprehensive" deal with the UK stating that it's the first of many.  Now, while the markets were certainly happy that Trump is making deals happen, the UK isn't exactly the counterparty that the markets were hoping for. They certainly aren't a major concern when it comes to trade, especially since their one of our closest allies.

China is the most important puzzle piece of the tariff problem, and last week was great news for investors. Starting with late last week, the Trump administration started hinting at reduced tariffs - lowering to 80% from their 145% level. What we got on Sunday was EVEN BETTER. Us and China agreed to slash tariffs for 90 days after the weekend talks yielded "substantial progress". The US is dropping tariffs from 145% to 30% as talks continue. Powell and his gang won't be impressed with a temporary truce, we'll need to see long lasting trade peace to see rates fall, but this is a very important first step.

 It's inflation reporting week! Unfortunately, these reports only look backwards, and Powell's concern is FUTURE inflation. I don't expect these reports to move the market much until tariff woes are behind us but I'll be happy to be wrong. Make sure to follow us on Instagram for immediate reactions to all  news.