Bank Failures Lead to Lower Mortgage Rates

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The first good news for potential homebuyers has come out recently with a drop in mortgage rates. Rates had been at a high of over 7 percent, but due to the news of two bank failures, they dropped toward a 6 percent level.

The collapse of both Silicon Valley Bank and the Signature Bank seems to have shaken up the market. As a result, the banks have lowered the 30-year mortgage rates to 6.68 percent. It is a significant drop in mortgage rates since the previous Thursday, when they were 7 percent. NerdWallet says that the average on March 15 for a 15-year fixed mortgage is 5.79 percent, which is lower than just one week ago.

Mortgage Rates and Treasury Bonds

Average mortgage rates are tied to the 10-year Treasury notes. When the yields of Treasury bonds drop, it also lowers the value of all mortgage rates. The fall of the two banks decreased the value of Treasury bonds, TheRealDeal says, which caused the sudden drop in mortgage rates.

New Mortgage Applications Have Jumped Much Higher

Homebuyers have begun to move to take advantage of the lower interest rates, resulting in a rise in new contracts for home sales. Some homeowners are taking advantage of the lower interest rates and are refinancing their home loans for a better deal.