As of December 1, 2022, Mortgage rates fell for a third straight week, notching their biggest three-week decline in 14 years. Over the last month, that rate has dropped from 7.16% to 6.4%, according to the Mortgage Bankers Association.
Federal Reserve has been raising federal fund target rates. Should the mortgage rate continue to increase too? It depends. It is the visible hand of the supply and demand of the bond market. Most mortgages made in the U.S. end up being bundled and securitized into investment products, bonds that are eventually sold to investors across the world.
Because of recent data suggested inflation may have peaked and the economy may be slowing or even recession is coming. Many investors believed that Federal Reserve’s rate hike might slow. Therefore, the bond investors want to buy the mortgage bonds with the high interest rates. This raises the price of those debts because high demand. Hence, the yields of those bonds decrease because the price and yield of the bonds go opposite direction.
How interesting! Learned something new everyday.
I also heard that predicting the short-term mortgage trend is a fool’s game. I know the inflation would cool eventually and the interest rates will drop but I just don’t know when exactly.