The Federal Housing Finance Agency reported that mortgage rates on purchases of newly built homes (MIRS) rose by one basis points over the month of July 2018 to 4.60 percent, marking the ninth consecutive monthly increase. The FHFA contract rate for Newly-built homes, also inched up 3 basis points to 4.62 percent in July. However, information compiled by Freddie Mac suggests that mortgage rates may have taken a breather in July. After rising for eight consecutive months, mortgage rates were about flat over the month, falling by four points to 4.53 percent from 4.57 percent in June. Despite the four basis points decline in mortgage rates, they remain near the peak of the recent cycle, 4.59 percent.
Monetary policy continues to exert upward pressure on mortgage rates, and as expected, the Fed held the federal funds rate steady at 1.75 percent to 2.00 percent at the August Federal Open Market Committee meeting. However, the statement following the meeting reflected the recent firming in inflation, making it possible for a rate increases in September and December of this year. However, if trade tensions intensify, weighing on consumer and business confidences and the equity market, the Fed could temper the rates as a counterbalance measure.