Mortgage rates fell last week for the fourth consecutive
week despite the fact that the Federal Reserve hiked interest rates another 25
basis points. According to an article
published on cnn.com, the 30-year fixed rate mortgage averaged 6.09% which was
down from 6.13% the week before. This
represents the lowest rate since September of 2022 and is down a full point
from the 7.8% peak in November, although rates are still up significantly from
a year ago when the average mortgage rate was 3.55%
According to CNN, the most recent drop made a $400,000
mortgage attainable for three million more households as compared to the
previous rates.
The Federal Reserve does not directly control mortgage rates
but they do set short-term interest rates which impacts the yield on Treasury
bonds, and as treasury yields go up, mortgage rates go up too.
The most recent rate hike, which was more modest than the
markets expected, signals that inflation is slowing and the economy slows,
which is good news for the mortgage industry.
The article quotes Mike Fratantoni, senior vice president of
the Mortgage Bankers Association.
“Investors are betting that the economic slowdown and the Fed’s eventual
victory over inflation will result in lower rates over time.”
The Mortgage Bankers Association is now forecasting that
mortgage rates will continue to drop through 2023, and end the year closer to
5%.
https://www.cnn.com/2023/02/02/homes/mortgage-rates-february-2/index.html
1 comment:
Although I believe that the decreasing cost of borrowing for mortgages has excellent consequences for households looking to purchase their own home, I can't help but think about the fact that due to more people looking to borrow for buying houses, and developers producing more houses, inflation rates may once again start rising due to demand-pull inflation, which may eventually cause the Fed to raise interest rates again in hopes of increasing mortgage rates, causing this vicious cycle of rising interest rates and decreasing real value of money for consumers.
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