The 30-year mortgage rate shot up the day after the Federal Reserve cut interest rates.
Hours after the Federal Reserve cut its benchmark interest rate on Wednesday by 25 basis points, mortgage rates ticked up 9 basis points.
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The Fed announced Wednesday that it would trim its key policy rate by a quarter of a percentage point, bringing it to the range of 4% to 4.25%. Around the time of the announcement, Mortgage News Daily, a website that posts daily updates on rates, crashed - possibly the result of people flocking to the site to see how mortgage rates reacted. The company told MarketWatch it was looking into why the site was down that afternoon.
Mortgage News Daily later reported that the 30-year rate went up by 9 basis points (0.09%) to 6.22% on Wednesday. On Thursday, it reported that the 30-year rate had gone up by 15 more basis points, to 6.37%.
In contrast, a report by Freddie Mac measuring weekly averages for the 30-year rate found that mortgage rates fell to the lowest level in 12 months on Thursday. That’s because Freddie Mac’s report gathered information prior to and after the Fed’s decision was announced. The weekly report doesn’t survey lenders, but is based on actual mortgage applications to lenders across the country that are sent to Freddie Mac.
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Mortgage rates aren’t tied to the Fed’s interest-rate moves. Instead, they typically fall in advance of a Fed rate cut, as MarketWatch has reported, because bond investors are trying to anticipate where the central bank will go. Mortgage rates are priced off the 10-year Treasury note BX:TMUBMUSD10Y by adding a spread.
Hence, the 10-year Treasury yield is a better gauge of how mortgage rates will move - and the 10-year yield was trending higher Thursday.
Mortgage rates have decoupled from the Fed’s benchmark / targets, basically, because fiscal policy and the overall economic outlook are so bad that traditional monetary policy is no longer effective.
This is generally what economists would call ‘a bad sign’.
Myself, I would go so far as ‘a very bad sign.’
My condolences to anyone who confused their local new/used home salesperson with a qualified economist, if they told you, and you believed, something like 'Fed rate cuts will lower mortgage rates!"
Yeah, yeah, but this situation is more nuanced. For example credit card interest rates will lower.
You have to actually be brain damaged if you think credit card rates are going down.
Like, smashing your face into a wall repeatedly, brain damaged.
US consumer credit scores are tanking, default rates on auto loans are skyrocketing, we will probably see the same with houses this or next quarter, something like 5 million (former?) students just all became some kind of delinquent or massively overburdened by the resuming student loan payments…
…credit card rates are going to go up, with the possible exception of those who more or less are deca-millionaires in networth and also have ~800 or better scores.
Everyone else is in for a very rough time.
They will go down temporarily before they go back up. Some parts of the old system are too clunky to deal with this new reality we live in. Some people are making a fortune right now on that arbitrage.
Could I perhaps interest you in a protective helmet?
Don’t worry, I also offer in house financing if you can’t afford it all at once, just uh, don’t read any of the paper work, and sign here here here and here and I’ll need a copy of your social security card and drivers liscense.
LOL