Mortgage Rates’ Big Yo-yo

September was a wonderful surprise as mortgage rates experienced a substantial drop. After tipping over 8% the year before, the average top-tier 30-year fixed mortgage rate had fallen to the bottom of 6%. Economic conditions were much closer to the Federal Reserve’s desired levels to start the Federal Rate’s downward trajectory. Celebration ripped across our industry as homebuyers restarted their hunts. Homeowners listing their properties had a wider buyer pool, which led to better offers. 

And for the first time in a decade, in September the Federal Reserve made a historic 0.50 point cut (and another 0.25 in November)! The news we had been anticipating for two years!!

So, within a matter of weeks, why did the 30-year fixed shoot back up to 7%?!? 

What caused the yo-yo?

Several factors sparked the significant increase in mortgage rates, but these two had the most significant trickle-down impact on the mortgage industry:

European Bond Markets: Specifically, the UK experienced a massive spike that spilled over to the US bond market. Remember, global events and economic shifts will cause fluctuations in home loans. And bond markets directly influence mortgage rates.

The Election Results: In a high-stakes election, the reaction has been huge in the bond market. Before the elections, the consensus was a Trump victory would push rates higher. The biggest reason behind the volatility is the expectation that US fiscal policies will change in the coming years. Some bond traders have started the process of exiting (and re-setting) trading positions.

Read: How the elections impact real estate.

Will interest rates improve again? Most likely. When is anyone’s guess? The current economic data is mixed:

Job Market: Unemployment remains cooler and solid at 4.1%, just below the Fed’s requirement of 4.4% for rates to drop. However, wages grew by 4%, outpacing inflation. The balance between jobs and workers is normalizing.

Consumer Spending: GDP (Gross Domestic Product) remains resilient. People are spending at a higher rate, especially on equipment and intangibles. Consumer sentiment hit a seven-month high. A strong economy means higher rates, so investing in real estate has weakened, increasing inventory and softening the market.

Inflation: CPI (Consumer Price Index) rose 2.4% year-over-year, slightly higher than anticipated but just slightly above the Fed’s desire for 2.2%. Core CPI prices bumped up to 3.3%, which was disappointing. But inflation has eased to a three-year low.

Read: When Will Interest Rates Go Down?

Marathon vs. Sprint Mentality 

We know it’s easy to feel discouraged when our market is experiencing some stubborn conditions. But waiting on the sidelines may not be the best approach.

Monitor Rates: This is not the first or last time we’ll see big fluctuations. Keep tabs of the numbers.

Stay In Touch: Consult with your lender about the best course of action based on your specific circumstances (especially if they shift).

Explore The Inventory: With more homes on the market right now, keep up the house-hunt! Contact your RE/MAX Alliance agent to schedule showings. Tweaking your list of must-haves may open up even more possibilities than you imagined.

When it is YOUR window of opportunity, your RE/MAX Alliance agent will be ready to help you make a move on a home you’ll enjoy that fits your budget.

Remember: Mortgage rates can vary based on individual circumstances and market conditions. The information provided in this blog post is for informational purposes only and should not be considered financial or mortgage advice. Consult with a professional mortgage advisor for personalized guidance.

Source: mortgagenewsdaily.com, The Rueth Team with Movement Mortgage