Home News Mortgage rates fall sharply after negative GDP report and Fed’s latest hike

Mortgage rates fall sharply after negative GDP report and Fed’s latest hike

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Mortgage rates fell sharply just one day after the Federal Reserve raised base rates.

Average interest rates on popular 30-year fixed mortgages fell to 5.22% on Thursday from 5.54% on Wednesday, when the Fed announced its latest rate hike. mortgage news dailyInterest rates fell further on Friday to 5.13%.

Interest rates haven’t moved much in the days leading up to the Fed’s meeting earlier this week, but slowly from their latest highs when the 30-year fixed temporarily exceeded 6% in mid-June. was going down.

A sign in front of a house for sale in San Francisco, California, July 14, 2022. The number of homes for sale in the US increased by 2% in June for the first time since 2019.

Justin Sullivan | Getty Images

Thursday’s decline also came on the heels of the Bureau of Economic Analysis’ Gross Domestic Product report that showed the US economy contracted for the second straight quarter. This is a widely accepted sign of a recession. GDP fell by 0.9% on an annualized basis during that period, according to Pre-estimateEconomists surveyed by Dow Jones had expected growth of 0.3%.

After the news, investors flocked to the relatively safe bond markets, driving yields lower. Mortgage rates roughly track the 10-year US Treasury yield.

“This is a very fast drop!” writes Mortgage News Daily COO Matthew Graham. “Perhaps even more interesting (and unusual) is the fact that mortgage rates are falling faster than US Treasury yields, usually the opposite, as investors flock to the most basic and risk-free bonds first. .”

Graham said last month’s change in the overall picture of interest rates created a situation in which investors were very fond of holding mortgages at lower interest rates.

“In a sense, mortgage investors are ahead of the game. If they hold mortgages at higher interest rates, they will lose money if they refinance their loans too soon. ” he added.

The question is whether the market is in the new range and interest rates will settle to current levels.

“If interest rates go backwards, volatility could go in the opposite direction,” Graham warned. He also pointed out that mortgage rates could fall further if economic data remain pessimistic and inflation slows.

Already, low interest rates seem to have had a small impact on potential homebuyers.real estate brokerage Redfin A slight increase in searches and home tours was reported over the past month, as it was below recent highs.

“The housing market appears to be in equilibrium as demand has leveled off,” said Darryl Fairweather, chief economist at Redfin. “There may still be surprises when it comes to inflation and the Fed rate hikes, but for now, the easing of mortgage rates has provided some relief to buyers who were reeling from last month’s spike in interest rates.”

But increased buyer interest has not translated into new contracts or sales. The supply of homes for sale is slowly increasing, with reports of more sellers lowering their asking prices.

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