Mortgage Rates Dip Below 5% For The First Time Since April
Abstract
The average rate for the most popular type of mortgage in the U.S. fell below 5% for the first time in four months, capping the biggest two-week decline in 35 years. Fed policymakers voted last week to hike the central bank's benchmark rate by 75 basis points to a range of 2.25% to 2.5% as they battle the worst consumer price increases since the 1980s. "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 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." Fed Chairman Jerome Powell said Wednesday he does not believe the central bank's aggressive monetary stance will send the U.S. economy into a recession, pointing to the strength of the labor market and wage growth, among other indicators. While the government reported last week its first of three GDP estimates for the second quarter showing the economy contracted 0.9%, Powell pointed out that "GDP numbers do have a tendency to be revised pretty significantly." After four consecutive hikes, Powell said the Fed's benchmark rate is now "Right in the range of what we think is neutral." Bond investors - particularly buyers of mortgage-backed securities - took Powell's comment as "Dovish," a signal the central bank's aggressive stance on monetary tightening may soften, said Paul Thomas, vice president of capital markets for Zillow. "Primary mortgage rates fell in turn," he said. The decline in mortgage rates will be much-needed support for home sales, which have retreated for five consecutive months, said Lawrence Yun, chief economist for the National Association of Realtors.