Just one day after the US central bank, the Fed, announced that they will raise the key interest rate, the mortgage interest rate falls to 5.22 percent from 5.54 percent on Wednesday, when the Fed announced that they will raise the key interest rate again. On Friday, the mortgage interest rate continues down to 5.13 per cent.
The drop also comes after it was announced that US gross domestic product fell for two quarters in a row, which technically means that the US economy is in recession. Annualized growth in GDP was -0.9 per cent, while positive growth of 0.3 per cent was expected.
– This is an exceptionally steep fall. Perhaps even more interesting is that mortgage interest rates fall more than the interest rate on the yield on government bonds. It is usually the opposite, that investors flee to the safest bonds, writes Matthet Graham, director of operations at Mortgage News Daily to CNBC.
The way forward
An important question now is whether the mortgage interest rate will stabilize at the current level.
– If interest rates reverse course, volatility can be as great in the opposite direction. If the economy continues to develop weakly and inflation subsides, mortgage interest rates may also go even lower.
Lower mortgage interest rates already seem to be having an effect. Real estate agency Redfin recently reported that it saw an uptick in the number of people looking for a new place to live in the past month, after mortgage rates peaked in June.
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