Mortgage rates have fallen slightly after two high profile bank failures, including the second largest bank failure in the history of the United States. This drop in mortgage rates is attributed to an increase in consumer fear after these banks failed, with people more concerned about placing their money into large purchases. Economists and consumers alike remain uncertain about the state of the economy, although this could cause mortgage rates to drop further, which could spur growth in the housing market.
What Happened in the Housing Market?
Mortgage interest rates dropped dramatically over the course of a week, dropping from a high of 7.05% on Wednesday, March 8, to 6.57% on Monday, March 13. While mortgage rates are still higher than they were in January, this drop still represents a major decline in the interest rates on mortgages across the country. This, in turn, is a potential indicator of uncertainty in the market, with consumers worried about their financial futures.
Why Did This Happen?
The drop in mortgage rates is attributed in large part to a pair of high profile bank failures that spooked consumers across the country. The first was Silicon Valley Bank (SVB), located in Santa Clara, CA, which suddenly experienced a bank run on March 10, representing the second largest bank failure in American history. The second bank to go under, Signature Bank, suffered its own major failure only two days after SVB, and both are now in receivership at the Federal Deposit Insurance Corporation (FDIC).
Why Did These Banks Fail?
Both SVB and Signature Bank shared a number of features in common. First, both banks experienced economic uncertainty after volatility in cryptocurrency markets led to consumers getting spooked, leading them to withdraw their money in large numbers. Second, both banks were particularly vulnerable to a run, due to having large amounts of uninsured deposits (over 90% in both cases).
What Effect Would This Have On You?
People with money in these two affected banks are obviously hardest hit, but other consumers are also concerned that other banks may suffer a similar fate. Thus far, however, the bank runs have been limited to these two regional banks. In the meantime, the decline in mortgage interest rates have made it potentially easier for prospective homeowners to seek a mortgage, presenting a potential opportunity for those who might have been scared by previously sky high mortgage rates.
At Liongate Homebuyers, we assist our clients with a variety of services related to buying and selling real estate, including purchasing homes for cash. We have experience handling real estate financing, especially for developers and house flippers. If you are interested in selling your home for cash, please contact us at 516-548-6553, or visit our contact page.
