Concerns Over Economic Recession... US Mortgage Rates Drop This Week by the Largest Margin Since 2008

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] As concerns over an economic recession grow, the soaring mortgage rates in the United States have also come to a halt. The weekly average recorded the largest drop since 2008.

The Wall Street Journal (WSJ) reported on the 7th (local time), citing mortgage lender Freddie Mac, that the fixed rate for a 30-year mortgage in the U.S. this week was 5.30%. This is a 0.40 percentage point drop from last week's 5.70%, marking the largest decline since it fell from 5.97% to 5.53% in December 2008.

Mortgage rates tend to move in line with the U.S. 10-year Treasury yield. This year, the 10-year Treasury yield, which had surged alongside the Federal Reserve's tightening measures, recently declined due to increased demand for safe-haven assets like government bonds amid recession fears. A drop in Treasury yields indicates a rise in bond prices.

In particular, the fact that mortgage rates fell even as the Fed signaled a 0.5 or 0.75 percentage point rate hike this month suggests that concerns about a recession are significant. Following the stock market being hit hard by rapid tightening and recession fears, there is speculation that the real estate market could be next.

Holden Lewis of NerdWallet noted that mortgage rates have declined for two consecutive weeks, stating, "Home prices could be lower than they were three weeks ago. There have been very few times this year when we could say that."

However, WSJ pointed out that U.S. mortgage rates remain high compared to the early year levels in the 3% range. Some analyses suggest there may be little impact on the housing market.

According to the Federal Reserve Bank of Atlanta, a typical American household buying a home with a loan would have to pay about $400 (approximately 520,000 KRW) more per month compared to January. As of April, a typical American household is estimated to spend 41.2% of its monthly income on mortgage payments.

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