Weekly Mortgage Rate Update- 05-20-25
Weekly Mortgage Rates
May 20, 2025
Mood swings
Credit rating agency Moody’s downgraded the US credit rating from AAA status to AA1 late Friday after markets closed. They made the change after concluding Congress won’t succeed in reducing deficit spending. This is not a news flash as this issue spans multiple administrations.
Perhaps the decision came as Congress debates the tax bill and it is evident that no matter who is in charge, they can’t/won’t end the debt spiral. Welcome to the party Moody’s where have you been? They now join credit rating agencies Standard & Poor’s and Fitch who previously downgraded our credit rating. Monday a knee jerk reaction in markets but by the end of the day mostly recovered. As markets also realized literally nothing has changed and this is business as usual.
In other news
Retail sales came in flat for April on the headline but the control group showed much weaker spending than the previous month. We had softer inflation, more manufacturing data showing contraction, and multi-decade low consumer sentiment. All this would have helped rates, but inflation expectations are still elevated. And as mentioned above, renewed focus on the deficits are weighing on the bond market and preventing an improvement in rates.
Will the higher inflation expectations actually become reality? Last week Walmart and Target both announced price increases are going to start being passed onto consumers. This gives other retailers cover to do the same. Although today Home Deport said they won’t be raising prices.
What’s ahead
It’s a slow news week for economic reports. We do have a 20 year bond auction tomorrow that will be interesting to see how much appetite there is for that.
Markets will cut out early on Friday and be closed Monday for the holiday. Mortgage rates spiked Monday morning but have recovered so we think we will remain in this range for a bit longer, but we are flirting with that 7% rate handle again
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