Why Did Mortgage Rates Fall After Bank Failures?
What wasn’t so expected, at least by some? A drop in mortgage loan interest rates resulted from the SVB failure. On Monday, March 13, 2023, CNBC.com reported a reduction in the “average rate” for 30-year fixed-interest rate mortgages.
They dropped to 6.57% that Monday, as reported by both CNBC and Mortgage News Daily. That is down from a high of over 7% the previous week. As CNBC notes, “Mortgage rates loosely follow the yield on the 10-year Treasury, which fell to a one-month low” in the wake of the SVB collapse.
Mortgage Rates Falling
In the same way it’s important not to panic when you read headlines about the Silicon Valley Bank issue, it is essential to avoid letting a short-term drop in mortgage rates fool you into thinking those numbers are here to stay.
They very well might be here to stay, given how unpredictable certain aspects of the mortgage market have been since the pandemic. But it’s also fairly unlikely if past performance is any kind of benchmark.
And while it is true that you should not use past performance to predict future results, it seems safe to say that for now, the interest rate drop on mortgage loans may be a temporary one.
If you are tempted to drop your plans to work your way up to a home loan application carefully, keep in mind that this bump in the road where the interest rates go may not last long enough for you to take full advantage of it. It takes time for mortgage rates to move lower and stay lower.
Interest Rate Influencers
It’s a bad idea to cut your planning and saving stages short based on a few headlines about lower rates; you may find the window of opportunity to take advantage of those lower rates is limited.
A sustained change in the interest rate environment is possible, but it takes time and the right conditions to spur an improvement. By the time you put in an application on the heels of a short-term rate improvement, you may have missed out already.
The Bottom Line
Don’t fret if you were not quite ready to pull the trigger on an FHA mortgage loan application during what is likely a short-term respite from higher rates.
The market will improve over time, but there may be several times along the way when breaking news and investor reaction to it may result in a short-term improvement rather than a long-term gain. It pays to know the difference.
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