Mortgage rates fell over the past week, despite inflation hitting a 13-year high. What’s going on?

0
21

Benchmark mortgage rates have declined over the past week for no apparent reason, continuing the breathing space for price-sensitive homebuyers.

The 30-year fixed-rate mortgage averaged 2.96% for the week ending June 10, three basis points less than the previous week, Freddie Mac said
FMCC, +1.05%
reported.

The 15-year fixed-rate mortgage fell four basis points to an average of 2.23%. The 5-year Treasury-indexed floating rate mortgage averaged 2.55%, nine basis points less than the previous week.

In general, mortgage rates move roughly in line with long-term bond yields, including 10-year government bonds
TMUBMUSD10Y, 1,462%,
and the past week was no exception.

“Freddie Mac’s 30-year fixed rate loan fell this week, along with 10-year US Treasury bond yields, as investors seem to accept the Federal Reserve’s view that current inflation is transitory and patient monetary response remains warranted, ”said Danielle Hale, Chief Economist at Realtor.com.

(Realtor.com is operated by News Corp.
NWSA, -0.30%
Subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a division of News Corp. is)

This week’s mortgage rate report could also reflect the monthly job data released last Friday for Employment figures in May May fell short of expectations.

However, other economists argued that interest rate movements are not as logical. “The downward movement in interest rates and the bond yields that were affecting them were confusing to markets because there was no apparent reason for such a move,” said Matthew Speakman, an economist at Zillow
Z, -2.27%
ZG, -1.59%.
He argued that May employment figures “should only have prevented a sharp rise in interest rates rather than fueling a major downturn”.

Interest rate movement could also reflect foreign purchases of US Treasuries, which would put interest rates under pressure. However, interest rates have yet to show a significant increase in line with the rate of inflation across the economy reached a 13-year high, according to the latest consumer price index figures. These new data could put some upside pressure on rates.

“The fact that interest rate movements do not appear to be tied to specific dates or developments makes it difficult to gauge their path into the near future,” said Speakman.

Meanwhile, mortgage lenders are becoming more pessimistic about the market outlook. A new poll from Fannie Mae
FNMA, +1.46%
found that 69% of lenders expect their profit margins to decline over the next three months, which is a record.

Mortgage applications have declined, in part due to a decline in refinancing activity as interest rates rose from record lows. But there is also evidence that the demand for home-buying loans has declined, suggesting that buyers are being worn down by the competitive marketplace.

“Housing bubble and crash worries are rife, and even popping up in a record low percentage of people who say it’s a good time to buy a home,” said Hale.

See also: Most Americans think it’s a bad time to buy a home – but there’s a reason they’re still ready to take the plunge