For the first time ever, mortgage rates plunge as inflation soars – East Bay Times

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Contradiction? Disorder? Chaos?

Freddie Mac’s 30-year fixed rate plunged 11 basis points to 2.98% this week, even as the country’s inflation rate jumped to 6.2%.

When was the last time this happened? Exactly never.

Traditionally, mortgage rates rise with inflation, says Richard Green, director of USC’s Lusk Center for Real Estate.

“It hasn’t happened at any other time in history,” Green said. “We live in a world of uncertainty.

The yield on 10-year Inflation-Protected Treasury Securities, or TIPS, was at a historically low price of 0.57, Green observed. Tips are indexed to inflation to protect investors from a decline in the purchasing power of their money, according to Investopedia.

These are Freddie’s lowest rates since September 23.

Importantly, Freddie’s 30-year weekly rate survey was completed ahead of the Labor Department’s inflation announcement on Wednesday, and rates may rebound. For example, the 10-year Treasury rate – which the 30-year fixed rate follows closely – jumped 10 basis points to 1.56% after the Labor Ministry announced.

So how have mortgage rates come down with the price inflation all around us?

The world is inundated with liquidity, which is keeping mortgage rates down, said Mark Vitner, senior economist at Wells Fargo Bank.

“The US government has spent $ 5.4 trillion since the start of the pandemic. The Fed added $ 4.3 trillion to its balance sheet, ”Vitner said. “(American households) have $ 2.3 trillion in excess savings. And the United States is acting as an anchor, pulling money from overseas because (the returns on investment) are so low overseas. “

Inflationary pressures are driven by demand, experts say. As we get back to normal, consumers want goods, but the shelves are empty. However, experts differ as to whether this is transitory inflation or whether it will last for a long time.

When COVID-19 hit, the world kind of came to a halt. And it wasn’t just the manufacturing.

“The states have not issued a truck driver’s license in recent years,” said Ted Tozer, senior researcher at the Milken Institute of Housing Policy and former president of Ginnie Mae for seven years under President Obama. “The supply chain problem is like a traffic jam trying to take its course. “

Vitner believes that we are currently at the peak of the supply disruption, although supply problems “will stalk the economy until the middle of the decade,” he said.

The number of workers in the supply chain could increase to around 3 million jobs over the next six months, said Tendayi Kapfidze, head of economic analysis at the US Bank. He pointed to last week’s report that the US workforce increased by 500,000 jobs.

Will mortgage rates continue to stay in check or will they rise, rise and move away with inflation trends?

“It wouldn’t be an absurd notion to think that rates could go down a bit,” said Jacob Channel, senior economist at Lending Tree. But eventually rates will rise. Channel predicts that mortgage rates will rise to 3-4% next year.

Tozer thinks there’s a tricky dance ahead as the Federal Reserve begins to scale back its pandemic-era bond buying program. The Fed bought $ 120 billion in treasury bills a month, including $ 40 billion in mortgage bonds.

“The key is to what extent the reduction will trigger higher rates,” Tozer said. The next question is how will government borrowing affect inflation? “Deficit spending could trigger a hike in mortgage rates. “

Will you lose your tremendous momentum in home appreciation? Will house prices go up?

Mortgage underwriting standards have remained tight since the Great Recession and the mortgage collapse.

“Credit underwriting has been so tight that it’s hard to see a bubble,” Vitner said.

What’s the next shoe to let go?

“It’s really murky right now,” Kapfidze said.

Freddie Mac Rate News: The 30-year fixed rate averaged 2.98%, 11 basis points lower than last week. The 15-year fixed rate averaged 2.27%, 8 basis points lower than last week.

The Mortgage Bankers Association reported a 5.5% increase in mortgage application volume from the previous week.

At the end of the line : Assuming a borrower gets the 30-year average fixed rate on a compliant loan of $ 625,000, last year’s payment was $ 47 less than this week’s payment of $ 2,628.

What I see: Locally, well-qualified borrowers can obtain the following fixed rate mortgages without points: 30-year FHA at 2.375%, 15-year conventional at 2.375%, 30-year conventional at 2.82%, conventional maximum 15-year balance ($ 625,000 to $ 822,375) at 2.375%, a conventional 30-year high balance at 2.69% and a fixed 30-year jumbo at 3.75%.

Eye-catcher loan of the week: A fixed 30-year FHA rate at 2.75% free of charge.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or [email protected] Its website is www.mortgagegrader.com.


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