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!"
I would say ‘is currently collapsing’ indicator.
You know, along with the uh, ‘oops, we overcounted job gains in the last year by about a million, teehee’… thing.
Also a lot of these jobs aren’t what you’d previously think of, which contributed to the miscalculation in the first place. Previously, from my understanding, the BLS assumed a company would eventually hire X people, based on previous averages. However, a lot of new companies are just self-employed gig-economy workers who won’t hire.
Anyhow, I’m European, so my insight into that market is somewhat limited. But the signs are there: more consumers defaulting on debt, resulting in stuff like car repos… It’s no coincidence BNPL for small purchases is booming. And with it, so are defaults on them.
This is why I’m so surprised European leaders are so keen on keeping tariffs low, I expect US sales to plummet significantly, especially for goods from Europe as these are typically either essential anyways, or optional and even without tariffs expensive enough to not be purchased during recession. I mean yeah it’s not black and white but you get the point.
The US is in a position that can’t be fixed by monetary policy, lower rates and you create jobs (though in my opinion, most of that money vanishes into speculation nowadays), but then inflation goes up, which continues to be an issue; or do the opposite with opposite effects (jobs go down, inflation slows). I think the latter combined with social programs to soften the blow would be the way to go, but the US has voted for bootstraps instead of helping anyone but the richest.
I suspect this will be worse than 2008, again with a lot of sub prime debt that has been accrued and can no longer be repaid. Just this time, all the substance is gone.