![]() ![]() “In the absence of the elevated risk premium and hewing closer to a historical average of 172 basis points, today’s 30-year fixed mortgage rate would be around 5.7%,” Ratiu said. The spread between the 30-year fixed rate mortgage and the 10-year Treasury hovers around 300 basis points, Ratiu pointed out, a level seen only a handful of times in the past 50 years and mostly during periods of high inflation and economic turbulence. ![]() When Treasury yields go up, so do mortgage rates when they go down, mortgage rates tend to follow.Ĭurrently mortgage rates are running higher than they should be in relation to the 10-Year Treasury, given historical trends, he said. Mortgage rates tend to track the yield on 10-year US Treasuries, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. While the Fed does not set the interest rates that borrowers pay on mortgages directly, its actions influence them. “While July’s jobs report itself is very unlikely to have a direct impact on the Fed’s upcoming decision, the decline to a 3.5% unemployment rate may imply that more significant slowing is needed to align with the Fed’s projected year-end rate of 4.1%,” she said.īorrowing costs will remain elevated until financial markets see an “all clear” signal from the Federal Reserve, accompanied by a stop in interest rate hikes, said George Ratiu, chief economist at Keeping Current Matters, a real estate market insights and content company. In addition, the most recent jobs report offered some mixed signals about the labor market, Xu said, including a smaller number of net new jobs added and a dipping unemployment rate. The Fed also will consider the forthcoming August employment and inflation data prior to the next policy meeting, in September. That faster pace of price increases could support the Fed’s concern that the battle is not over, Xu said.
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