I’m of the belief that mortgage rates won’t be going as high as some people are forecasting, at least not nearly as quickly. I say this because the dynamic between inflation, FED rate hikes, economic growth, and the bond markets should cause the yield curve to flatten and even invert in the medium term, holding down mortgage rates.
It’s obvious that inflation is here, but what’s not so obvious is what to do about. The problem with today’s inflation is that prices are generally being pushed higher by supply side constraints for various reason. The FED has started raising rates in an effort to cool the demand side, but it appears that any increases in the FED funds rate are having an outsized effect on economic growth. That dynamic will hold down treasury rates as there is a strong correlation between economic growth and treasury yields.
