Last week mortgage rates dipped to their lowest levels in two months! Let’s break down what caused this shift and what to watch for in the coming days.
The Economy Slows Down
Recent economic data paints a picture of a slowing economy. This has helped to cool inflation fears, a major factor influencing interest rates. Here are some key indicators:
• Lower GDP Growth: The recent revision of our gross domestic product (GDP) growth shows a significant slowdown compared to last year.
• Manufacturing Contraction: The manufacturing sector is actually shrinking, which suggests job losses and reduced pressure on wages.
• Fewer Job Openings: The most recent JOLTS report – a Labor Department report that tracks monthly change in job openings – indicates a decrease in job openings, potentially leading to a looser labor market.
What This Means for Rates
These signs of a slowdown are causing investors to favor bonds, which pushes mortgage rates lower. The 10-year Treasury note, a key benchmark, recently hit its lowest level since early April.
But Hold On…
While the recent rate drop is positive, it’s important to remember that things can change quickly. Here’s why:
• Upcoming Inflation Data: This week’s inflation report (CPI) could significantly impact rates. High inflation could reverse the recent downward trend. Consumer prices had been exceeding estimates until April’s results which came in as forecast. This month annual rates, which in April were 3.4 percent overall and 3.6 percent for the core, are expected at 3.4 and 3.5 percent respectively.
• Fed Meeting: The latest Fed Meeting happens this week on Tuesday and Wednesday. Following the meeting, the Fed will release their economic outlook next week, and their interpretation of the data could influence market sentiment and rates.
• Debt Ceiling Concerns: The Treasury Department’s ability to borrow money could be impacted by the debt ceiling debate, potentially affecting rates
The Bottom Line:
Mortgage rates dipped lower than they were a few weeks ago. However, with the uncertain economic picture and upcoming data releases, the trend is likely to cause them to fluctuate.
Staying informed is key! I’m here to help you navigate the ever-changing market and answer any questions you have about financing or the home-buying process. Let’s chat to see what options are available to you!
