Aerial view of existing homes near new homes under construction (UPPER R) in the Chatsworth neighborhood on September 08, 2023 in Los Angeles, California.
Mario Tama | Getty Images
The average rate on the 30-year mortgage fell 18 basis points to 7.40% on Tuesday, according to Mortgage News Daily, as Wall Street lowered its expectations for future Federal Reserve hikes.
The fall was the result of a sharp rally in the bond market, after the government’s monthly report came in below analysts’ expectations. As bond yields fell, so did mortgage rates, which continue to loosely an yield on 10-year Treasuries.
Mortgage rates had already been falling from their recent highs. A one-two punch of holding rates steady at their last meeting and a weaker-than-expected monthly earnings report signaled the end of interest rate hikes.
The 30-year fixed mortgage rate jumped over 8% on October 19, the highest level in more than two decades. It then fell more than 25 basis points in the first week of November to 7.38%, rebounding slightly last week and starting this week at 7.58%.
“While today’s inflation data was key in shaping the rate statement, the bond market’s response is nonetheless impressive,” said Matthew Graham, chief operating officer of Mortgage News. Daily. “Mortgage lenders have done a good job of keeping up with market trends as mortgage rates are often accused of driving the elevator up and down the stairs.”
While the recent mortgage rate increases have all been within 1 percentage point, compared to two years ago, when rates were near record highs of around 3%, buyers have make today’s home extremely sensitive to rates. Some can no longer afford a home or qualify for a mortgage. Home sales have been falling for several months, with some calling the market frozen even before the start of winter.
“The interest rate hike should be over, and the Fed needs to consider cutting interest rates significantly. In the meantime, the bond market is reacting as if the Fed will cut interest rates next year. in a few months and into the 6% range by spring 2024,” said Lawrence Yun, chief economist for the National Association of Realtors.
