A residential neighborhood in Austin, Texas, on Sunday, May 22, 2022.
Jordan Vonderhaar | Bloomberg | Getty Images
The typical rate on the favored 30-year fixed mortgage dropped to six.57% on Monday, in response to Mortgage News Each day. That is down from a rate of 6.76% on Friday and a recent high of seven.05% last Wednesday.
Mortgage rates loosely follow the yield on the 10-year Treasury, which fell to a one-month low in response to the failures of Silicon Valley Bank and Signature Bank and the following ripple through the nation’s banking sector.
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In real terms, for a buyer a $500,000 home with a 20% down payment on a 30-year fixed mortgage, the monthly payment this week is $128 lower than it was just last week. It continues to be, nonetheless, higher than it was in January.
So what does this mean for the spring housing market?
In October, rates surged over 7%, and that began the true slowdown in home sales. But rates then began falling in December and were near 6% by the tip of January. That caused a surprising 8% monthly jump in pending home sales, which is the National Association of Realtors’ measure of signed contracts on existing homes. Sales of newly built homes, which the Census Bureau measures by signed contracts, also surged far higher than expected.
While the numbers for February usually are not in yet, anecdotally, agents and builders have said sales took a giant step back in February as rates shot higher. So if rates proceed to drop now, buyers could return once more — but that is a giant “if.”
“This mini banking crisis has to drive a change in consumer behavior with a view to have a long-lasting positive impact on rates. It’s still all about inflation,” said Matthew Graham, chief operating officer at Mortgage News Each day.
Markets now must contend with the “inflationary impact of consumer fear,” he added, noting that Tuesday brings a fresh consumer price index report, a monthly measure of inflation within the economy.
As recently as last week, Federal Reserve Chairman Jerome Powell told members of Congress that the most recent economic data has are available stronger than expected.
“If the totality of the information were to point that faster tightening is warranted, we can be prepared to extend the pace of rate hikes,” Powell said.
While mortgage rates don’t follow the federal funds rate exactly, they’re heavily influenced by each its monetary policy and its considering on the longer term of inflation.
