A residential neighborhood in Austin, Texas, on Sunday, May 22, 2022.
Jordan Vonderhar | bloomberg | Getty Images
The average 30-year fixed rate mortgage rate fell to 6.57% on Monday, according to the Daily Mortgage News. This is down from a rate of 6.76% on Friday and a recent high of 7.05% last Wednesday.
Mortgage rates loosely track yield 10 years treasurywhich fell to a one-month low in response to the failures Silicon Valley Bank And signature bank The ensuing ripple through the country’s banking sector.
In real terms, for a buyer looking for a $500,000 home with a 20% down payment on a 30-year fixed term mortgage, the monthly payment this week is $128 lower than it was just last week. However, it is still higher than in January.
So what does this mean for the spring housing market?
In October, rates rose more than 7%, and that real slowdown in home sales began. But rates then began to fall in December and approached 6% by the end of January. That caused a surprising 8% monthly jump in pending home sales, which is the National Association of Realtors’ measure of contracts signed on existing homes. Newly built home sales, which the Census Bureau measures by contracts signed, also rose much higher than expected.
While the numbers for February are yet to come out, dealerships and builders said sales took a big step back in February as prices rose. So if prices continue to fall now, buyers can come back in again – but this is a big “if”.
“This small banking crisis has to drive a change in consumer behavior in order to have a lasting positive effect on interest rates. It’s still all about inflation,” said Matthew Graham, chief operating officer of Mortgage News Daily.
He added that markets now have to deal with the “inflationary impact of consumer fear,” noting that Tuesday brings a new report on the Consumer Price Index, a monthly measure of inflation in the economy.
Last week, Federal Reserve Chairman Jerome Powell told members of Congress that recent economic data came out stronger than expected.
“If the totality of the data indicates that a faster tightening is warranted, then we would be prepared to increase the pace of rate hikes,” Powell said.
While mortgage rates don’t exactly track the federal funds rate, they are strongly influenced by the Federal Reserve’s monetary policy and its thinking about the future of inflation.