Mortgage rates are falling as banks go bankrupt

The average interest rate on the popular 30-year fixed-rate mortgage fell to 6.57% on Monday Mortgage News Daily. That’s down from a 6.76% rate on Friday and a recent high of 7.05% last Wednesday.

Mortgage rates easily follow yields 10 years treasurywhich fell to a monthly low in response to the defaults Silicon Valley Bank And signature bank and the resulting surge through the nation’s banking sector.

In reality, the monthly payment for a buyer looking at a $500,000 home with a 20% down payment on a 30-year fixed-rate mortgage is $128 less this week than it was last week. However, it is still higher than in January.

So what does this mean for the housing market in spring?

Interest rates rose by over 7% in October and that started the real slowdown in home sales. But rates then started falling in December and were close to 6% at the end of January. This resulted in a surprising 8% monthly increase in pending home sales, which the National Association of Realtors uses as a measure of signed contracts for existing homes. New home sales, which the Census Bureau measures by signed contracts, also rose far more than expected.

While February’s numbers aren’t out yet, agents and builders have anecdotally said that sales took a big step down in February as prices soared. Now, if rates continue to fall, buyers could return — but that’s a big if.

“This mini-banking crisis needs to change consumer behavior to have a lasting positive impact on interest rates. It’s still all about inflation,” said Matthew Graham, chief operating officer at Mortgage News Daily.

Markets must now contend with the “inflationary impact of consumer fears,” he added, noting that a new CPI report, a monthly measure of inflation in the economy, is due on Tuesday.

Just last week, Federal Reserve Chairman Jerome Powell told members of Congress that the latest economic data came in stronger than expected.

“If the body of data suggested that faster tightening was warranted, we would be willing to increase the pace of rate hikes,” Powell said.

Mortgage rates, while not exactly tracking the federal funds rate, are strongly influenced by both the Fed’s monetary policy and its considerations about the future of inflation.