It seems as though the average 30yr fixed mortgage rate was rising from 6% to 7% just a few weeks ago. In fact, it just doesn’t seem like it. This is exactly what happened on 2 March. Rates remained near 7% until March 9, but began to fall rapidly after the Silicon Valley Bank failure.

Since then, additional concerns about the banking sector and several weak economic reports have kept rates under pressure. This week’s reports have been particularly helpful. Today’s installment featured the most widely followed report on the services sector, which is coming in well short of expectations. A sub-component of that report suggested the lowest inflation pressures since mid-2020.

Rates are set by the bond. More demand for bonds = lower rates. Investors buy more bonds when the economy is weakening and the risk of inflation is low. All this to say that the current fall in rates is highly logical based on the economic data.

The two biggest economic reports of any month will come over the next few trading days (Friday’s jobs report and next Tuesday’s Consumer Price Index). If these reports sing like the data we’ve seen so far this week, rates could soon drop below 6%. If they come in unexpectedly higher, rates could quickly return to the mid-6% range.

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