The Fed's efforts to curb inflation seem to be working in the eyes of investors. The expectation for the two-year inflation rate has dropped to 3.2% from 4.4% in mid-June, according to Bloomberg. Housing costs are a crucial piece of measuring inflation, and higher mortgage rates have had aA key metric to look at is the difference between the yield on a 10-year Treasury note — a common benchmark in debt markets — and the rate for a 30-year mortgage. Today the 30-year mortgage rate of 5.
The 10-year Treasury yield has dropped by 0.75 percentage points since mid-June, to about 2.75%, a level that Bank of America expects to see at year end. It says mortgage rates will keep falling if interest-rate volatility declines, narrowing their distance from the 10-year Treasury yield. If that spread reverts to the historical average, that would put the 30-year mortgage rate at about 4.5%.
"We expect this to happen and see it as improving the affordability outlook for housing," the Bank of America analysts, led by Chris Flanagan, wrote. In a monthly forecast released July 18, the Mortgage Bankers Association predicted a more modest drop in mortgage rates, putting the 30-year rate at 5.2% at year end.Subscribe to push notifications
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