Mortgage rates fell this week, reaching their lowest level since winter.
Despite generally strong overall June jobs data, a booming stock market and broader signs that the economy continues to recover, investors continue to revise their highly optimistic growth forecasts earlier this year. This shift in sentiment is putting downward pressure on long-term Treasury yields and the mortgage rates they affect. Long-term Treasury yields – an indicator of market expectations for economic growth – rose above pre-pandemic highs in March, but have been steadily declining since then, in part due to lower expectations about the amount of monetary and fiscal stimulus the market will receive.
Mortgage rates, which are usually affected by these long-term yields, have declined as a result – a move that accelerated this week as investors raised concerns over the COVID-19 Delta option. Overall, mortgage rates are now near their lowest level since February, completely reversing the sharp upward movement that took place at the beginning of the year. While long-term rate changes are likely to have a positive side, the change in market forecasts suggests that rates have little reason to sharply rise in the near term.