Mortgage Market Update: Interest Rates Improve and Inflation Trends to Watch in Orange County

This Week in the Market: Rates Improve, Economic Outlook Shifts

This past week brought some good news for mortgage rates, with interest levels improving to their best since mid-December. Let’s take a look at what’s driving the shift and what we can expect in the week ahead.

Interest rates improve and inflation trends shift. How does this effect you?

Treasury Secretary Scott Bessent’s Focus on Yields

In his first interview as Treasury Secretary, Scott Bessent emphasized his focus on lowering the 10-year Treasury Note yield rather than pressing the Federal Reserve to cut the Fed Funds Rate. This is significant for housing and mortgage markets because the 10-year Note tends to move in tandem with 30-year mortgage rates.

Bessent highlighted the need to curb inflation and increase energy supply. He noted, “For hardworking people, energy costs are a key factor in long-term inflation expectations. If we can lower gasoline and heating oil prices, consumers will not only save money but also gain optimism about the future.” He further stated that if energy prices decrease, tax-cut extensions are enacted, and the economy is deregulated, interest rates will naturally decline.

This underscores a crucial point: the Fed does not directly control mortgage or long-term interest rates. Instead, these rates respond to economic conditions, inflation, and fiscal policies set by the administration and Congress.

Global Bond Market Influences U.S. Rates

Interest rates in the U.S. also saw some relief from global market trends. The United Kingdom’s latest bond auctions saw robust demand, helping to lower yields on their government bonds, known as Gilts. This, in turn, placed downward pressure on bond yields worldwide. Once again, the trend proves that when interest rates climb too high, investor demand eventually kicks in, leading to lower yields.

Oil Prices and Inflation Outlook

Since January 15th, oil prices have steadily declined from over $80 per barrel to just above $71. This drop in energy costs is significant, as lower oil prices tend to ease inflation pressures. If this trend continues, it could lead to further declines in the 10-year Treasury yield and, by extension, mortgage rates.

Mortgage Rate Update

• 30-year Fixed Mortgage Rate: Averaged 6.89% as of February 6, 2025, down from 6.95% the previous week. A year ago, it stood at 6.64%.

• 10-year Treasury Yield: Currently at 4.50%, down from its 2024 high above 4.80%. If it remains below this threshold, it could set the stage for rates to move even lower, possibly testing 4.20%.

Looking Ahead: Key Economic Reports

Next week, we’ll be watching key inflation indicators closely:

• Consumer Price Index (CPI): A crucial measure of consumer inflation that could drive market movements.

• Producer Price Index (PPI): Tracks wholesale inflation, serving as a leading indicator of future price trends.

• Treasury Debt Auctions: The government will sell $125 billion in new Treasury debt, which could impact bond yields and mortgage rates.

My Final Thoughts

Mortgage rates are continuing their downward trend, creating opportunities for buyers and homeowners considering refinancing. Is there ever a bad time to invest in your future? Never—you can always refinance later. This week, we’re keeping a close eye on inflation reports and bond market movements. With a new President comes change, and we’re hopeful for positive shifts in the Newport Beach housing market.

For more real estate insights and market updates, follow @brianaharper_ or reach out to discuss what these trends mean for you and your home!