The option of fear leads to a drop in mortgage rates to 2.78%

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The average 30-year fixed rate mortgage fell 10 basis points to 2.78% in the week ending July 22. recession weeks, according to mortgage rate data released on Thursday Freddie MacPMMS.

Freddie Mac’s chief economist Sam Hater said concerns over the COVID-19 Delta option and pandemic recovery are weighing on economic growth.

As the economy continues to recover, Treasury yields have declined and mortgage rates have followed suit, Hather said. “Unfortunately, many homebuyers cannot take advantage of the low rates due to low stock levels and high prices.”

While potential home buyers are facing difficulties in the marketplace, Hater added that the cut in mortgage rates gives homeowners the opportunity to refinance and cut their monthly payments.

Mortgage rates this year have largely remained below 3%, despite the fact that predictions that they will return to higher levels sooner. Economists and investors follow any guidance closely The federal reserve that he could start cutting back on purchases of mortgage-backed securities and bonds.


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But that is “still a long way off,” said Federal Reserve Chairman Jerome Powell at a Congressional hearing last week. The US central bank plans to continue buying assets until significant progress in employment is achieved.

This adaptive stance is underpinned by concerns over the Delta option and market outlook, as noted this week in an analysis by Goldman Sachs. V Federal Open Markets Committee scheduled to meet next week.

President Joe Biden also spoke out against fears of rising inflation during a press conference this week. “No serious economist” assumes that the economy is heading towards uncontrolled inflation, he said.

“If we were ever to face uncontrolled inflation in the long run, it would create real problems for our economy,” Biden said, adding that his administration “will remain vigilant about any necessary response.”

Since March 2020, purchases of Fed assets have been split between $ 80 billion in U.S. Treasuries and $ 40 billion in mortgage-backed securities each month, reducing the cost of long-term borrowing and, in turn, lowering mortgage rates. A year ago at this time Fixed rate mortgage for 30 years on average 3.01%.

Despite the low cost of borrowing, the housing market is showing signs of sluggishness.

10-year Treasury bond yield dropped sharply last weekpartly due to investor fears about the spread of COVID varieties and their impact on global economic growth, according to the report Mortgage Bankers Association

Mortgage applications for buying a new home decreased by 3% from May to June, down 23.8% year on year, according to the latest data report from MBA.

Sales of new single-family homes declined 5% to 704,000 units from 741,000, the trade group found. New home sales also fell slightly, from 68,000 to 66,000 in May. Overall, new home sales were down 7% year-over-year.

According to Joel Kahn, assistant vice president for economic and industry forecasts, Joel Kahn, homebuilders have faced higher prices for some building materials, and labor shortages have led to lower new home sales and higher prices. He added that the constant shortage of stocks leads to intense competition for available units.

According to the MBA, the average loan price rose to a record $ 392,370 in June.

“In addition to price increases, we are also seeing a decrease in the number of purchase transactions at lower price levels, as more potential buyers are excluded from the market, which further puts upward pressure on loan balances,” said Kahn.

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