Drop in US mortgage rates to below 7% provides little relief to home buyers
2 min read
The drop in US mortgage rates to below 7% provides little relief to home buyers.
Mortgage rate has dropped for the second time in eleven weeks in the week ending November 3. Rates on 30-year fixed mortgages fell 13 basis points to 6.95%. In the previous week, 30-year fixed rates rose 14 basis points to 7.09%.
Following the current drop, rates are up 196 basis points from the most recent low of 4.99% on August 3. Year over year, 30-year fixed rates increased by 386 basis points.
The drop on Thursday also corresponded with the release of the Bureau of Economic Analysis’ gross domestic product data, which revealed that the US economy contracted for the second consecutive quarter. That is a generally regarded indicator of impending recession. According to the preliminary estimate, GDP declined 0.9% on an annualised basis over the period. Dow Jones polled economists, forecasted 0.3% growth.
As this news coming-out, investors rushed to the relative safety of the bond market, prompting rates to plummet. Mortgage rates are influenced by the yield on the 10-year US Treasury bond.
“This is an extremely quick drop!” exclaimed Matthew Graham, COO of Mortgage News Daily. “Perhaps even more interesting (and unexpected) is that mortgage rates have fallen faster than US Treasury yields.” It’s usually the other way around, with investors flocking first to the most basic, risk-free bonds.”
Graham stated that the recent rate move has produced a situation in which investors would choose to hold mortgage debt with lower interest rates.
In the coming week:
US consumer inflation expectations will be closely watched ahead of Tuesday’s wholesale inflation results. Retail sales, on the other hand, are expected to have the greatest impact on yields and mortgage rates.
Following last week’s US Jobs Report, the figures would have to impress in order to push mortgage rates back down to 7%. Despite Fed Chair Powell’s hawkish FOMC news speech on Wednesday, December Fed pivot bets remain.
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