The mortgage rate fell lower over the past week, and it was a blessing to those who wanted to buy a home or refinance.
The 30-year mortgage rate on average was 3.55% during the week ending August 22, down five basis points from last week, Freddie Mac
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Prices for 30-year mortgages have only risen eight times on a weekly basis so far this year – otherwise, they have fallen or remained steady.
Loan rates track the 10-year Treasury
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Last week was the return on the 10-year banknote and the 2-year Treasury
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inverted for the first time in over a decade, which means that the short-term return was higher. Investments in the yield curve have historically signaled that the US economy may face a recession.
Looking ahead, it is unclear whether mortgage rates will fall again or increase. Federal Reserve officials appear to see the interest rate cut last month as a "recalibration" and not necessarily as the first of several cuts, according to the report from their last meeting released Wednesday.
When the Federal Reserve cuts prices, short-term interest rates instead of long-term interest rates affect that of the 30-year mortgage loan. Nevertheless, the mortgage market tends to bake expectations of future Fed moves to the offered rates, which explains why mortgage rates fell well before the Fed took hold.
The decline in mortgage rates this year has given rise to the largest refinancing boom in three years.
The latest existing home sales data released Wednesday indicated that falling prices in July led to an increase in home buying activity, especially in the West. Lower interest rates have also triggered the biggest refinancing boom this year.
"The benefit of lower mortgage rates is not only to provide home sales, but also to support the homeowner's balance through higher monthly cash flow and ever-increasing equity," Freddie Mac said in the report Thursday.
But the same headwinds that have prevented many people from buying homes remain. There are very few properties for sale, and house prices are rising as a result. It has made it much more expensive to buy a home, and low mortgage rates have only marginally offset the reasonableness of reasonableness.
With the economy potentially heading for a recession, interest rates may be lower than in the weeks and months ahead. But a weaker economy can ruin consumer confidence – which would make it even less likely that people would be inclined to buy a home.