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Another Great Inflation Report!
We’ve talked the last two plus years about how Inflation is the name of the game for where Mortgage Rates are headed.
The June CPI Inflation report came out on July 11th was the latest rendition of the monthly Super Bowl for Mortgage Rates.
The forecasted Inflation was an increase of 0.2%, meaning this was the baseline the market was already planning for.
The results came in at 0.1% – lower Inflation is the best possible news!
The Federal Reserve’s goal is to see Inflation head back to 2.0% annually. If you divide this into a monthly number (2.0% / 12) = 0.16% per month, so June’s 0.1% was well within the Fed’s bullseye.
If we go back to March 2024, monthly CPI Inflation have went from:
- March: 0.4%
- April: 0.3%
- May: 0.2%
- June: 0.1%
That averages out to 2.5% monthly Inflation the last four months, which is even more closely in line that the last 12 month Inflation of 3.0%.
The Fed wants to feel comfortable we’re headed to 2.0% yearly inflation but wants to start cutting Rates before we get there, so that the economy doesn’t crash.. the Fed wants a “smooth landing”, where they cut rates a little before Inflation hits 2.0%, because the effects of Rate Cuts aren’t felt right away.
The Market says there’s a 100% chance of Rate Cuts by September!
Right on cue, lower inflation reports are now shifting the focus onto the Fed cutting rates.
Again, they don’t want to wait too long and continue to make the economy suffer with higher rates longer than needed. If they do that, then consumers will continue depleting savings, racking up debt, and it could possibly backfire and cause a recession.
The Fed wants to gracefully cut Rates as they feel confident Inflation is headed to a 2.0% annual resting place… and the latest 0.1% Inflation Report for June may have just done that.
The market believes there’s a 6.7% chance the Fed cuts rates at their upcoming meeting July 31st.
But the other 93.3% of the market believes the Fed will at least make their first Rate Cut the following meeting on September 18th.
Combined, that makes up the entire market – meaning we’re looking at 100% odds the Fed begins to cut in less than two months – relief looks like it’s on the way!
As a result of the good CPI Inflation report that came in for June, Mortgage Rates are hovering around 6-month lows.. but they’re still waiting on more long-term direction from the Fed’s response to the Inflation data.
Jobless Claims also putting Pressure on Fed to Cut Rates
Aside from CPI Inflation, another one of the bigger reports that has large impacts on Mortgage Rates is ‘Jobless Claims’. This measures the number of people who filed initial Unemployment claims.
It doesn’t measure existing unemployed citizens, but it tracks how many new people are joining the unemployment ranks, making it a good gauge on the condition of the economy.
Back in early May I’d mentioned how 17 of the 19 Federal Reserve members said they didn’t believe we’d see Unemployment hit 4.1%… well, guess what we just hit?
That’s right: 4.1% Unemployment rate.
This is the other huge indicator that can cause the Fed to initiate Rate Cuts in the near future. The longer they hold rates high, more employers will have to lay off employees, leading to higher unemployment.
Rate Cuts will be a welcomed relief to hold the economy together, because we can certainly see certainly see the cracks mounting.
The ‘Fast Pass’ to Your Home Loan
We all love getting to skip the line with anything we do.
McGowan Mortgages gets a ‘Fast Pass’ with the Banks/Lenders we work with.
We not only have the largest variety of Banks/Lenders/Investors to get you the best deal and perfect fit on your Home Loan, but being the #1 Loan Officer at the largest Mortgage Broker in the country has its perks.
We’ve been fortunate to get to personally get to know the Owners, Presidents, and VP’s of some of the largest mortgage companies in the country.. and that matters when we’re needing to push your loan through Underwriting if we’re working the deal with them.
They don’t treat us or our clients like just another file #, they know that we send the most business to them, so they pave the way to allow our loans to take priority.
There are multiple Lenders we work with that give us our own designated Underwriters. They give us the Underwriting Manager’s cell phone number.. and they’ll fly us to their headquarters to map out these plans to make sure our loans go through smoothly.
This is how we’ve designed the ‘Fast Pass’ for our clients to get their loans closed quickly!
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