US mortgage rates have risen back above 6% after a brief dip below this key psychological threshold. This reversal is attributed to the impact of military strikes in Iran on financial markets, causing Treasury yields to climb contrary to typical safe-haven behavior during turmoil. While this week’s increase is modest, sustained conflict and rising oil prices could disrupt the downward trend in mortgage rates, potentially hindering efforts to alleviate the housing market’s “lock-in effect” despite recent affordability gains for buyers. Nevertheless, home sales remain sluggish, with a notable decline reported in January, even as median home prices continue their upward trajectory.
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On Wednesday, the Bank of Canada reduced its key interest rate by 25 basis points to 2.5 per cent, marking its first cut since March. This decision was made due to a weakening economy, softening job market, and reduced inflation risks, which the central bank believes are now more “contained”. The U.S. trade war continues to impact the Canadian economy, specifically in tariff-exposed industries. Despite a stronger-than-expected consumer spending in the second quarter, the central bank decided that a rate cut was still appropriate to better balance the risks going forward.
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Thirty-year fixed mortgage rates jumped to 7.1%, a mid-February high, driven by fluctuating bond yields influenced by tariff changes and a cooler-than-expected inflation report. This surge follows a volatile week for bonds, marking potentially the worst week for 10-year yields since 1981, coinciding with a significant drop in consumer sentiment. The increased rates, coupled with economic uncertainty, negatively impact the crucial spring housing market and consumer confidence. Experts predict weakened housing activity as a result of these factors.
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Trump’s first broken promise will be his promise of 3% mortgage rates. It’s a promise that simply can’t be kept, no matter how much he wants to. Getting interest rates down to 3% would require the Federal Reserve to purchase trillions of dollars in debt, which is unlikely to happen. The Fed is an independent entity, and the government doesn’t have the power to tell them what to do. The only way the government could influence interest rates is by balancing the budget, raising taxes, and cutting spending, which is not something his supporters would be happy about.
There’s a good chance that his supporters will begin to scapegoat certain demographics, like migrants, and ramp up the culture war to distract from his broken promises.… Continue reading
Mortgage rates have jumped back over 7% as stronger economic data rolls in. This news comes as a surprise to many who were hopeful that the rates would continue their downward trend. The previous decrease in rates was largely speculative, with hopes that the Federal Reserve would cut the funds rate in March. However, with strong job data and the Fed suggesting the need for more patience, it makes sense that the rates have gone back up.
As someone who is currently in the market for a house, these rising rates are disheartening. The dream of homeownership is slowly slipping away as the interest rates become more and more unfavorable.… Continue reading
John Q. Hosedrinker