Mortgage rates have fallen over the past week, despite a 13-year record inflation rate. What is happening?
Benchmark mortgage rates have fallen over the past week, with no clear reason for a drop, continuing the respite for price-sensitive homebuyers.
The 30-year fixed rate mortgage was on average 2.96% for the week ending June 10, down three basis points from the previous week, Freddie Mac FMCC,
The 15-year fixed rate mortgage fell four basis points to an average of 2.23%. The 5-year Treasury-indexed variable rate mortgage was on average 2.55%, down nine basis points from the previous week.
Generally speaking, mortgage rates move roughly in line with long-term bond yields, including 10-year Treasury TMUBMUSD10Y,
and last week was no exception. “The Freddie Mac fixed rate on a 30-year loan fell with the 10-year Treasury yield this week, as investors seemed to accept the Federal Reserve’s view that current inflation is temporary and that an answer Patient monetary policy continues to be warranted, ”said Danielle Hale, chief economist at Realtor.com.
(Realtor.com is operated by News Corp NWSA,
subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a division of News Corp.)
This week’s mortgage rate report may also reflect monthly employment data released last Friday, as May’s employment figures are lower than expected.
Other economists, however, argued that the movement of interest rates was not so logical. “The downward slide in bond yields and yields that influence them has puzzled the markets as there was no obvious reason for such a move to occur,” said Matthew Speakman, economist at Zillow Z,
He argued that May’s employment figures should have “simply prevented a sharp hike in rates, rather than fueled a significant slowdown.”
Changes in interest rates could also reflect foreign purchases of US Treasuries, which would put downward pressure on rates. Either way, interest rates have yet to rise significantly, in line with the economy-wide rate of inflation, which peaked in 13 years according to the latest figure. of the consumer price index. These new data could put upward pressure on rates.
“The fact that rate moves don’t appear to be tied to specific data or developments makes it difficult to chart their course in the near term,” Speakman said.
Mortgage lenders, meanwhile, are increasingly pessimistic about the market outlook. A new investigation by Fannie Mae FNMA,
found that 69% of lenders expect their profit margins to decline over the next three months, which is a record.
Mortgage applications fell, in part due to a decline in refinancing activity, as rates rose from their record lows in 2021. But there is also evidence that demand for loans to buy of homes has declined, which could show that buyers are exhausted by the competitive market.
“Concerns about real estate bubbles and crashes are common, even showing up among a record number of people saying it’s a good time to buy a home,” Hale said.