In a surprising turn of events, US mortgage rates have experienced their biggest fall in four months following the wake of SVB's decision to lower its interest rates. The Mortgage Bankers Association (MBA) has reported that the average rate for a 30-year fixed-rate mortgage fell by 8 basis points to 3.09%, while the rate for a 15-year fixed-rate mortgage dropped by 7 basis points to 2.41%.
SVB, or Silicon Valley Bank, is a commercial bank that primarily serves technology and life science companies, as well as venture capitalists and private equity firms. The bank made headlines earlier this month when it announced that it would be cutting its prime lending rate by 25 basis points, citing concerns over economic growth and inflation.
The MBA's report indicates that SVB's decision has had a ripple effect on the wider mortgage market, prompting other lenders to lower their rates in response. According to Joel Kan, the MBA's Associate Vice President of Economic and Industry Forecasting, "The 30-year fixed mortgage rate saw its largest single-week drop since August, and the 15-year fixed fell to its lowest level since early January. This drop in rates spurred a flurry of refinance activity, particularly for higher-balance borrowers."
The news will come as a relief to many homeowners who have been grappling with rising mortgage rates in recent months. The Federal Reserve's decision to start tapering its bond purchases in November 2022 has caused interest rates to climb steadily, making it more expensive for homeowners to refinance or take out new mortgages.
However, the MBA warns that the current drop in rates may not be sustained in the long term. "While this week's decline in mortgage rates is a welcome development for borrowers, we expect that rates will continue to rise gradually over the coming months as the economy strengthens and inflation pressures persist," Kan said.
