Mortgage rates drop below 5% for first time since April

Source: CNN Business

Mortgage rates dropped for the second week in a row, falling below 5% for the first time since mid-April. The 30-year fixed-rate mortgage averaged 4.99% in the week ending August 4, down from 5.3% the week before, according to Freddie Mac. But that is still significantly higher than this time last year when it was 2.77%. Rates rose sharply at the start of the year, hitting a high of 5.81% in mid-June.

But since then, economic concerns have made them more volatile. "Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth," said Sam Khater, Freddie Mac's chief economist. The up and down is expected to continue, he said. "The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to navigate the current economic environment."

The drop comes as surprisingly positive reports for some economic indicators counterbalanced the talk of looming recession, said George Ratiu, Realtor.com's manager of economic research. "Without a clear direction, markets are confining mortgage rates to move within a tighter range, as the sharp upward push has moderated," he said. In response to high inflation the Federal Reserve raised its benchmark interest rate by 75 basis points last week, the second hike of that size in as many months.

The Federal Reserve does not set the interest rates borrowers pay on mortgages directly. Instead, mortgage rates tend to track 10-year US Treasury bonds. But they are indirectly impacted by the Fed's efforts to tame inflation. As for consumers, he said, they continue to spend, amassing a record $16.2 trillion in household debt according to data the Federal Reserve released this week

Read more: https://www.cnn.com/2022/08/04/homes/mortgage-rates-august-4/index.html