Buyers can reap savings as mortgage rates slide — but it’s not all good news
The broader economic outlook is concerning
After the Federal Reserve’s most recent announcement, mortgages rates tumbled — and they may keep falling.
The Fed said that it would get back into bond buying, causing rates to fall, CNBC reported. The average rate on the 30-year fixed dropped to 4.34 percent from 4.40 percent — the lowest point in more than a year. In November, the rate soared over 5 percent, which led home sales to fall in the following months.
The decline followed Chairman Jerome Powell’s remarks that the central bank would stop the runoff of bonds from its balance sheet sooner than expected. That led the 10-year Treasury to slide.
“This is about as big of a change as anyone expected. It means the Fed will be buying more bonds more quickly,” said Matthew Graham, chief operating officer of Mortgage News Daily. “And bond buying results in lower rates, all other things being equal.”
Home sales are affected by even small movements in rates, the report said, especially since buyers are dealing with affordability issues. For example, for a 30-year fixed rate on a $300,000 mortgage, every 25 basis point drop entails a savings of $50 a month. The rate has fallen 75 basis points since November — which comes out to $150 of savings per month.
Despite the savings, the broader outlook for the economy may be concerning. The Fed is holding off on raising rates due to the economic landscape.
“While a plus for homebuyers, if concerns about the economic outlook rattle consumer and homebuyer confidence, it could offset the benefit of lower mortgage rates,” said Danielle Hale, chief economist at realtor.com. [CNBC] — Meenal Vamburkar