The financial markets in the world, and the United States are often intertwined, and last week was no exception. The S&P 500, a gauge of stock market health, kicked off the second half of 2024 with its best weekly performance since late April. Orion’s brokers know that the advance was driven by labor market data that has supported the case for Federal Reserve interest rate cuts, some “dovish” commentary from Fed chair Jerome Powell, and the minutes of the U.S. central bank's last monetary policy meeting.

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Will mortgage rates go down? Brokers work with Orion for our products and service, not our ability, or desire, to predict rates. But brokers can tell your clients that in the simplest sense, the economy drives whether bond prices go up or down, and that includes mortgage rates. Interestingly, thirty-year mortgage rates tend to drop when the economy is doing poorly, including when our economy is in a recession. Today the economy is anything but in a recession. The jobs market has been strong, and inflation, while lower compared to a few months ago, is still above the Federal Reserve’s 2 percent target. Many economists believe that mortgage rates will moderately decrease in the second half of the year and given additional inventory, price growth should temper, boding well for interested homebuyers.

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Orion’s brokers also know that mortgage rates are not set directly by the Fed, but by investor appetite, particularly for 10-year Treasury bonds, the leading indicator for fixed mortgage prices. That can lead to rate swings: they soar on news of Fed hikes, then plummet in anticipation of a cut. Given the Fed doesn’t expect to cut rates as much this year as it initially predicted, mortgage rates might not go down any time soon.

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As we move through July and the rest of 2024, debt levels are a big worry, with both presidential candidates adding trillions to the national deficit during their first terms in office. "The United States is running a very large deficit at a time when we're at full employment," Fed Chair Jay Powell said at an ECB conference in Portugal. "The level of debt that we have is not unsustainable, but the path that we're on is unsustainable… That's completely not controversial. This is something that should be a top-level issue. You can't run these kinds of deficits even in good economic times for very long. In the longer run, we're going to have to do something sooner or later, and sooner will be better than later."

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In terms of economic news this week, the calendar will be dominated by the Consumer Price Index (CPI) report and Federal Reserve chair Jerome Powell's testimony to Congress. The CPI print is forecast to show a 0.1 percent month-over-month rise in inflation, while the annual core inflation rate is expected to be unchanged at 3.4 percent.

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Regardless of the numbers, Orion continues to offer superior products and service to help you help your borrowers in this environment of tough affordability. Ask your Orion AE what’s new!

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