According to Mortgage News Daily, the average 30-year mortgage rate dropped by 18 basis points to 7.40% on Tuesday as Wall Street reduced its forecast for additional Federal Reserve hikes.
The government’s monthly inflation report came in lower than expected, which sparked a strong rally in the bond market and caused the drop. Mortgage rates, which roughly correspond to the yield on the 10-year Treasury bond, decreased along with bond yields.
Already, mortgage rates were starting to drop from their recent highs. A weaker-than-expected monthly employment report and the Fed’s decision to hold rates steady at its most recent meeting suggested that interest rate hikes would soon come to an end.
On October 19, the 30-year fixed mortgage rate increased by more than 8%, reaching its highest point in more than 20 years. After that, it dropped by over 25 basis points to 7.38% in the first week of November. It then made a small comeback last week and is now starting this week at 7.58%.
Matthew Graham, chief operating officer of Mortgage News Daily, stated, “The bond market’s reaction is impressive even though today’s inflation data was extremely important in shaping the rate narrative.” “Considering that mortgage rates are frequently blamed for moving up and down the stairs, mortgage lenders have done a great job of keeping up with market movement.”
Even though the most recent increases in mortgage rates have only been by a percentage point, buyers today are much more sensitive to rates than they were even two years ago, when rates were almost at all-time lows of around 3%. Some people are no longer able to afford a house or get approved for a mortgage. Many months have seen a decline in home sales; some have even declared the market frozen before winter officially arrived.
“The Fed will need to give lowering interest rates serious consideration as the rate increases should be finished. The bond market is responding in the interim as though the Fed will lower interest rates in 2019. By the spring of 2024, mortgage rates should be in the 6% range, according to National Association of Realtors chief economist Lawrence Yun. They are expected to approach 7% in the coming months.
