Following the market-shaking failure of Silicon Valley Bank, mortgage rates fell on Monday.
The most recent figure from Mortgage News Daily indicates that the typical 30-year mortgage rate decreased to 6.57% on Monday. This is a decrease from 7% on Thursday when the bank’s stock took a beating and 6.76% on Friday when SVB failed. The rate is based on the yield on the 10-year Treasury note, which has decreased by about 30 basis points since Wednesday’s closing as investors bet the unfolding uncertainty may convince the Federal Reserve to hold off on raising interest rates.
Although housing experts are unsure of how long the dip will stay, the unexpected drop in rates may present an opportunity for homeowners and purchasers who have been waiting to lock in a cheaper rate due to rising property prices.
Although there is still a lot of uncertainty, Daryl Fairweather, chief economist at Redfin, told Yahoo Finance that he expects mortgage rates to decline in the near future. And because purchasers have proven to be extremely sensitive to interest rates, I anticipate them to take advantage of those mortgage rates.
According to Jeff Reynolds, broker at Compass and creator of UrbanCondoSpaces.com, a nearly half-point decline in rates may give a buyer at least 5% of their purchasing power back.
According to him, affordability improves “the minute mortgage rates fall,” he told Yahoo Finance.
Given ongoing affordability issues, the most recent fall might not be enough to persuade some purchasers to enter the market, according to Keith Gumbinger, vice president of HSH.com. For instance, a buyer of a median-priced property still had to make a monthly mortgage payment that was 49% higher than it was a year ago two weeks ago when interest rates were at 6.65%, according to statistics from Realtor.com.
Any decrease in rates, according to Gumbinger, “certainly only partially erases the substantial gains of the past few weeks,” he said in an interview with Yahoo Finance. “It’s advantageous for individuals who are in or about to enter the market, but overall, rates aren’t looking too good.”
Nonetheless, additional drops can result in some action. For instance, mortgage applications for purchases and refinances increased as interest rates started to decline at the beginning of the year, almost falling below 6% in the start of February.
Although some people were drawn to it, Gumbinger noted that it took weeks of decreased rates to draw in customers and spur even a slight uptick in activity.
Expect the home market to remain relatively unchanged if the rate decrease is fleeting.
Customers who aren’t already in the market, or who aren’t well-prepared to act, can’t easily benefit from a large reduction in rates, according to Gumbinger. Rates must drop and stay there for a while in order to be most advantageous, so prospective homebuyers and existing homeowners have the opportunity to react.”