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Mortgage Applications Are Down And Rates Are Up

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EDITOR'S NOTE: Demand for refi’s and home purchases has fallen dramatically as mortgage rates rise. Of course, none of this should be surprising. The Fed has made it clear that easing inflation is its number one priority. But is the Fed’s tightening program sufficient for the job? Interestingly, the two components negated from the CPI to get a “core” reading, namely food and energy, are externally driven. The war in Ukraine is driving up costs in both segments, and dramatically so. Furthermore, these two components are what tend to affect American households the most, as we all need to drive to work and put food on the table on a daily basis. While a large segment of the American population is living paycheck to paycheck due to inflation, the Fed is still fixated on carrying out a “soft landing” so as to not crash the markets. And if it takes at least six months for the effect of rate cuts to work into the economy, what might happen if the Fed’s aggressive actions are simply not aggressive enough? 

Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 20, 2022.

The Refinance Index decreased 4 percent from the previous week and was 75 percent lower than the same week one year agoAnd under Biden, the refinance index is down -83.2%.

Source: Confounded Interest

The good news? The seasonally adjusted Purchase Index increased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 16 percent lower than the same week one year agoAnd the mortgage purchase applications index is down -12% under Biden.

While mortgage interest rates are up 71.7% than one year ago and mortgage rates are up 87% under Biden. As The Federal Reserve signals (but not yet accomplished) monetary tightening.

Source: Confounded Interest

Once again, The Fed is dead set on cooling inflation caused by 1) Biden’s anti-drilling policies and 2) the remnants of the Federal government spending splurge to combat Covid. The Fed has been increasing their asset purchases (purple line) as inflation increase (blue line). Now they are signaling a decline in the balance sheet (green line) in the hope that it will cool inflation. Fat chance.

Source: Confounded Interest

Let’s see how DEAD SET The Fed is about tightening monetary policy in the face of rising energy and food prices while a war rages in Ukraine and China in a Covid lockdown.

We are all goin’ down the road feelin’ bad under Biden.

Originally published on Confounded Interest.

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