Mortgage rates declined nearly half a percent over the course of two days after worse than expected economic reports became public. These reports have stoked fears that the economy may be facing a potential recession, with mortgage lenders reacting by lowering rates. This also comes at the same time that inflation is reaching the highest levels they have been at in decades, while the Federal Reserve is raising interest rates more broadly.
What is Happening in the Housing Market?
Between Wednesday, July 27, and Friday, July 29, mortgage rates fell from 5.54% to 5.13%, a total drop of .41%, which is a dramatic drop that happened over an extremely short period of time. This is a major decrease from the recent high for rates, which peaked in June at just over 6%. This drop in mortgage rates follows negative economic news that has created fears of a potential oncoming recession.
Why is This Happening?
Two major pieces of news appear to have had a major impact on the mortgage rates, causing them to fall as fast as they did. First, the Federal Reserve announced it would again be raising its own interest rates, as a means of countering high inflation. Second, the Bureau of Economic Analysis, the government agency tasked with analyzing trends in the market, said it predicted the United States’ Gross Domestic Product (GDP) fell at an annualized rate of 0.9%, much worse than the expected growth of 0.3% that some economists had predicted.
What Does This Mean?
The interest rate of a mortgage indicates the percentage amount that mortgagees must pay on top of the amount of money they borrowed, making it the effective “price” for taking out the mortgage. With mortgage rates falling so dramatically, it may mean that some people may start looking to purchase homes, as mortgages become more affordable. However, this recent decline in mortgage rates is competing against the Fed raising interest rates and inflation increasing costs across the board.
Why Does This Matter to You?
If you are looking to buy a house, this drop in mortgage rates could be good news for you, since it means you will need to pay less interest on your mortgage. Sellers could also see a benefit from this, as it means they may be able to get away with listing their homes for slightly higher than they would if rates were higher. However, with demand beginning to stabilize, it is unlikely that there will be more people looking to purchase a home for some time.
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.
