Topline
Mortgage rates tumbled last week to their lowest level in over a month, according to data released Wednesday morning by the Mortgage Bankers Association, as waning confidence in the U.S. banking system provides a reprieve to home buyers.
Mortgage rates and home prices are falling.
Key Facts
The average 30-year fixed mortgage rate slipped from 6.71% to 6.48% last week, falling to its lowest level since mid-February and its largest percentage decline since November.
Mortgage applications rose 3% last week, according to the survey, as buyers take advantage of rapidly declining home prices.
That followed a wild stretch for the banking sector – headlined by the failures of Silicon Valley Bank and Signature Bank, the nation’s second and third-biggest such failures ever – causing investors to pack into safer assets such as government bonds.
Yields for 10-year U.S. Treasury notes sank 70 basis points to 3.4% in the two-week period ending last Friday, helping drive down mortgage rates, which are influenced by longer-term Treasury yields.
But home buyers hoping for a similarly precipitous decline in mortgage rates may not be so lucky, considering yields on 10-year government bonds shot back up to over 3.6% Wednesday and an apparent decline in the historically strong correlation between yields and mortgage rates.
The spread between 30-year mortgage rates and 10-year Treasury yields now sits at roughly 300 basis points, far higher than the typical 180 basis-point difference, noted Mortgage Bankers Association economist Joel Kan, attributing it to increased “market volatility” surrounding mortgage-backed securities.
What To Watch For
The Federal Reserve will announce at 2 p.m. whether they will further increase the federal funds rate at 2 p.m. ET, following the conclusion of the previously scheduled meeting of its policy-setting committee. Markets largely expect a 25 basis-point increase from the central bank. An increase to the federal funds rate, which sets overnight borrowing costs between banks, typically leads to similar increases in mortgage rates.
Surprising Fact
It’s more than twice as expensive to take out a mortgage today than it was in the beginning of 2022, when 30-year mortgage rates were just above 3%. Rates climbed dramatically throughout 2022 as the Fed hiked the federal funds rate from near 0 to 4.5% to 4.75% and increased recession fears sent bond yields surging.
Big Number
12.3%. That’s how much the median sale of existing homes have fallen over the last eight months in the U.S.
Further Reading
What Bank Troubles Mean for Your Mortgage (Wall Street Journal)
Housing Market: Home Prices Post First Yearly Decrease In 11 Years As Sales Jump (Forbes)
Fed’s Looming Rate Decision Could Confirm Crisis At Hand—Or Raise Odds Of ‘Imminent Recession’ (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2023/03/22/housing-market-mortgage-rates-sink-to-5-week-low-amid-bank-havoc/