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Mortgage Rates Soar to Highest Level Since February Amidst Volatile Bond Market
The average interest rate on a 30-year fixed mortgage climbed 13 basis points on Friday, reaching 7.1%, according to data from Mortgage News Daily. This surge marks the highest mortgage rate observed since mid-February, injecting further uncertainty into the spring housing market.
Turbulent Week for Interest Rates
Mortgage rates experienced significant fluctuations throughout the week, mirroring the volatility in bond yields. Yields initially spiked mid-week in response to the implementation of new tariffs by President Donald Trump on numerous countries. Subsequently, yields receded when the tariff rate was reduced for most nations just hours later. However, tariffs on imports from China currently remain elevated at 145%.
Bond Market Reacts to Inflation Data
Despite the release of a cooler-than-anticipated inflation report, bonds commenced selling off again on Friday. Mortgage rates generally track the performance of the 10-year Treasury yield, explaining the upward pressure.
Historical Context of Bond Market Volatility
Matthew Graham, chief operating officer at Mortgage News Daily, characterized the week’s bond market activity as exceptionally turbulent. “There have been some difficult weeks for bonds periodically, but for most individuals currently in the workforce, this past week represents the most dramatic surge in 10-year yields witnessed in their careers. Only those with careers predating 1981 would have encountered a more volatile week,” Graham noted.
Divergent Perspectives on Bond Market Trends
Graham offered two interpretations of the current bond trading landscape: “This situation could either signal the conclusion of the most severe week for 10-year yields since 1981, or it could be viewed as the culmination of a fairly typical two-week period, consistent with the prevailing trend of the last 18 months.”
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Consumer Sentiment and Inflation Expectations Decline
Adding to the economic unease, a separate monthly report released on Friday revealed a substantial decline in consumer sentiment, falling below expectations. Furthermore, inflation expectations experienced a sharp increase, jumping from 5% in March to 6.7% in April. This represents the highest level of inflation expectation since 1981.
Impact on the Spring Housing Market
These economic developments are unfolding during the crucial spring housing market period. For the majority of consumers, purchasing a home represents their most significant single investment.
Economist Warns of Housing Market Weakness
Nancy Lazar, chief global economist at Piper Sandler, expressed concerns about the housing market outlook in the current economic climate during an interview on CNBC’s “The Exchange” on Friday. “In the present environment, with mortgage rates escalating and consumers exhibiting apprehension regarding the job market, the housing market is anticipated to experience weakness,” Lazar stated.