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Recent Federal Reserve rate hike.

In June 2022, for the first time since 1994, the Federal Reserve raised benchmark interest rates by 0.75 points in an effort to curb inflation and mitigate other factors of an overheated economy. In just two short years, we have a reversal of 2020 monetary policies of stimulating the economy with quantitative easing and cheap credit, including low borrowing costs for homeowners. The Federal Reserve’d maneuver worked, pulling us out of the 2020 recession and propping up national industries, including housing.

In that time, the mortgage industry hit a refinancing boom and the housing market soared. We at HP Mortgage LLC helped many of our clients take advantage of rock bottom rates. We had conventional borrowers, as well as self-employed borrowers and investors who received great non-QM rates in a borrower-friendly lending environment.

Housing inventory remained low while demand went up, resulting in a red hot real estate market. In other sectors, consumer demand for goods and services hit record highs, while supply remained low. COVID supply chain issues increased prices across the board. These patterns helped lead to an inflation level that hasn’t been seen in decades.

In 2022, the Federal Reserve is now focused on combating rising inflation. This was largely due to COVID supply chain woes, overheated Federal Reserve monetary policies, high consumer spending, and current energy prices being major drivers in inflation rising to a level we haven’t seen since the 1970s. The perception of rising inflation itself also raises inflation in a positive feedback loop, as suppliers preemptively raise prices in anticipation of future cost increases. It is now more expensive for consumers to put food on the table with groceries up 12%, and we have all felt the pain at the gas pump with gas over $5.00/gallon. Renters are also seeing increases in their monthly rent, and utility costs are up across the board.

The Fed’s recent move to hike 75 basis points was accompanied by the stock market moving into bear market territory. The Fed are likely to propose several more rate increases to urgently offset inflation.

So what does this mean for current borrowers? 

The housing market has been more resilient so far, and inventory is opening up, with real estate investment opportunities coming around the corner. Borrowers and investors who are currently shopping may consider options such as paying points up front to buy down rates, interest-only loans, or rate lock premiums. A good mortgage broker can advise on the best course of borrowing to manage your monthly payments, lower your exposure to the changing rate market, and answer questions such as whether a fixed or variable interest rate is right for you. Every borrower scenario varies in a rapidly changing climate for the mortgage industry. We have every product option, from conventional mortgages to hard money lending, and everything in between. We also have a guaranteed lowest rate!

If you are self-employed or an investor, we have special loan options for you to access industry competitive rates and will help you navigate this dynamic market. Borrowers can still take advantage of smart investment opportunities or purchasing their dream home, and weather the storm of today’s market. We have great options for potential borrowers who are locked into hard money scenarios, upcoming balloon payments, and even difficult situations such as foreclosure bailout and investor options to offset their borrowing costs by leveraging their property values.

Give us a call today to find out how we can help you with your borrowing needs!

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