For the first time since April, purchase mortgage rates dropped below the 5% level, reflecting the Federal Reserve’s monetary policy that has led the U.S economy to a “technical recession.”
Bond yields increase and prices decline when demand declines. Mortgage rates typically increase along with the 10-year Treasury yield. Bonds are viewed as a secure investment during a recession, and prices rise and yields fall as a result of increased demand, which often drives down mortgage rates.
What Happened: According to Freddie Mac FMCC, the 30-year fixed-rate mortgage averaged 4.99% in the week ending Aug. 4 as compared to 5.3% the previous week.
“Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth,” said Sam Khater, Freddie Mac’s chief economist.
“The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to navigate the current economic environment,” he added.
To create weekly national averages, Freddie Mac averages rates from about 80 lenders across the nation.
The Fed raised interest rates by 75 bps in its July meeting, marking its fourth rate hike this year as it attempts to control inflation. The second quarter saw a 0.9% fall in the gross domestic product (GDP), marking the second consecutive decline — the standard definition of a recession.
Some economists and President Joe Biden refute recession talks, citing a strong labor market.
What It Matters: As mortgage rates have decreased, consumers are now applying for loans.
The U.S Mortgage Market Index, which tracks the amount of mortgage loan applications, rose 1.15% for the week ending July 29, after dropping for four straight weeks to its lowest point in more than 20 years.
Freddie Mac’s survey shows the 15-year fixed-rate purchase mortgage averaged 4.26% with an average of 0.6 point, down from last week’s 4.58%. The 15-year fixed-rate mortgage averaged 2.10% a year ago.
Image and article originally from www.benzinga.com. Read the original article here.