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Mortgage rates fall for the first time since February — but don’t necessarily expect a long reprieve

Following seven weeks of consecutive increases, benchmark mortgage rates have dipped. And that will give homeowners and home buyers a chance to lock in lower rates — but the opportunity isn’t guaranteed to last very long.

The 30-year fixed-rate mortgage averaged 3.13% for the week ending April 8, down five basis points from the previous week, Freddie Mac
FMCC,
+2.75%
 reported Thursday. Previously, the rate on the 30-year loan had reached its highest level since June of last year.

The 15-year fixed-rate mortgage, meanwhile, fell three basis points to an average of 2.42%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.92%, up eight basis points from the previous week.

The decline in mortgage rates over the past week was driven by the modest drop in U.S. Treasury yields, according to Sam Khater, chief economist at Freddie Mac. Generally, mortgage rates roughly follow the direction of long-term bond yields, including the 10-year Treasury
TMUBMUSD10Y,
1.644%,
but that relationship has ebbed and flowed over the course of the pandemic.

“The drop in rates creates yet another opportunity for those who have not refinanced to take a look at the possibility,” Khater said in the report.

But whatever break Americans get from rising mortgage rates, it is not yet clear whether it will be short-lived or not. Zillow
Z,
+2.70%
ZG,
+1.96%
economist Matthew Speakman projects that the reprieve could be lasting in light of how mortgage rates have responded to recent economic data.

March’s job figures far exceeded expectations, and the leading index that tracks the health of the services sector reached an all-time high. But mortgage rates fell in spite of these positive signs for the broader economy. “While the market had likely already priced in some of these strong reports, the modest move was still an encouraging signal for rates which have been trying, and failing, to find a ceiling for the past several weeks,” Speakman said.

Instead, mortgage rates may be responding to pandemic-related signals, he argued. “With coronavirus cases beginning to rise again in most U.S. states and many countries around the world, investors have a renewed reason for caution, which tends to push bond yields, and mortgage rates, downward,” Speakman said.

Nevertheless, Speakman and other housing economists agree that the long-term trajectory for mortgage rates does appear to be upward. And that will create pressure for the housing market.


‘With coronavirus cases beginning to rise again in most U.S. states and many countries around the world, investors have a renewed reason for caution.’


— Matthew Speakman, an economist with Zillow

Homeowners, who might otherwise be inclined to sell their homes right now but who may also have recently refinanced when rates hit rock-bottom, could be hard-pressed to list their homes anytime soon. The lack of inventory in the housing market would make it harder for a seller to find a new place to live, and the higher prevailing mortgage rates today essentially jack up the price of any homes they would buy.

“Sellers are locked in a catch-22, wanting to list their home but unable to find a suitable replacement home, further contributing to the vacuum of homes for sale,” said George Ratiu, senior economist at Realtor.com. “For buyers, rising rates mean higher monthly payments and being forced to look for less expensive homes.”

Consequently, the spring home-buying season could be a slow one this year for the real-estate industry because of supply-related constraints.


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bourbiza

Bourbiza Mohamed. Writer and Political Discourse Analysis.

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