What’s currently the buzz that many financial pundits have been warning of in the past few months? A possible recession down the road with some even saying the U.S. is currently in an economic slowdown. Economic activity is largely based on the findings from the Bureau of Economic Analysis (BEA) through its Gross Domestic Product (GDP) data.

The BEA defines GDP as the value of the goods and services produced in the U.S and tells us that the percentage that GDP grew (or shrank) from one period to another is an important way for Americans to gauge how their economy is doing. The United States’ GDP is also watched around the world as an economic barometer. A recession is usually signaled by two consecutive quarters of negative GDP. The current forecast for Q2 2022 is an anemic 0.3% after the -1.6% was registered in Q1. So, the U.S. is on the cusp of a recession.

Normally, if an economy is in a recession, borrowing costs usually decline due in part to a slowdown in loan volume as consumers may be unwilling to take on a large debt. Currently, the Fed is trying to raise borrowing costs but that is for short-term loans such as auto, student loans, credit cards, and the like. Longer-term rates, such as the 30-year fixed-rate mortgage, are impacted by the economy, inflation, economic data, supply, and demand. Consumer inflation (Consumer Price Index/CPI) is currently at a 40-year high of 8.6%.

If the U.S. falls into a recession it is most likely that we have seen the highest mortgage rates for the foreseeable future. The Mortgage Bankers Association reported that the 30-year fixed-rate mortgage recently fell to 5.84% from the near 6% seen in the previous week which was the highest since November 2008. And even if the U.S. wards off a recession, Consumer Confidence and Sentiment are at extremely low levels and economic activity has slowed which would hold rates near current levels.

Bottom line: If you are interested in purchasing a home, it remains a great time with rates beneath the rate of inflation.

Source: Mortgage Market Guide

We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.