Its hard to believe that 2024 is halfway over, but as we head into Q3 interest rates for investment property mortgage loans continue to drop across the board.

The US Five Year Treasury Yield – the key benchmark for DSCR Loans, dropped from a close of 4.52% as of May 31, 2024 to 4.33% as of June 28, 2024 – the last business day of the month and quarter. This drop of 19 basis points is substantial – a greater than 4% drop, although a smaller drop than the low of the month which occurred at the mid-point, just 4.22% as of the June 14, 2024 close.

Despite the minor drop – private lenders like Easy Street Capital are improving interest rates dramatically for real estate investors – as these experienced and professional real estate flippers and property owners continue to earn a track record of trust and performance. Easy Street improved rate pricing by a whopping 1.25% (125 basis points) on our Standard Series DSCR Loan Program – equivalent to approximately 0.375% or 37.5bps in lower rates! An example would be a rate of 7.25% quoted at the beginning of June would be reduced to 6.875% to start July!

In addition, rates for Hard Money Loans (bridge loans typically used for fix and flips) improved as well, with rates lowered to starting at 9.25%, even with increased leverage (up to 90%) and lowered minimum origination fees as part of our July kickoff supporting experienced flippers!

What Causes Mortgage Rates to Change – June 2024 Recap

June 2024 was a busy month for economic data releases that caused mortgage rates to go down. However current mortgage rates in July 2024 are not down directly from May, rates when up and down throughout the month!

Here are some of the highlights that caused the biggest change in rental property mortgage rates in June 2024:

Jobs Report – Friday June 7, 2024

The first big market-moving event in June 2024 was the Jobs Report, released early in the morning on June 7, 2024. This is the report showing unemployment rate and estimated change in nonfarm payrolls. The report showed an increase in jobs of 272,000, which was well higher than the 190,000 consensus Wall Street estimate.

Because the amount of added jobs came in significantly higher than estimates, which is the most important comparison, treasury bonds and mortgage bonds moved dramatically lower, as a higher than expected jobs number indicated to market traders a lower likelihood of the Federal Reserve cutting interest rates in the next few months. The 5-year treasury yield increased significantly, moving from 4.29% up to 4.46% by close, an extremely large move upwards of 17 basis points.

CPI Report and Federal Reserve Decision – Wednesday June 12, 2024

The big increase in rates thankfully didn’t last too long as the other most important report for mortgage rates – the CPI Report, which measures consumer price inflation – was released five days later on June 12, 2024. The report showed a headline increase of 3.3%, which was below expectations of 3.4%, and a 0% month over month change.

This was a very special Wednesday in the world of investment property interest rates however, as it not only had the CPI Report release but was also the day of the June Federal Reserve Meeting and Press Conference! The Federal reserve left interest rates unchanged for the seventh straight meeting however the new “dot plot” that was released was seen as “bearish,” as it showed a consensus projection of just one rate cut in 2024 (25 basis points) versus a projected 3 cuts as of the March 2024 meeting. After interest rates had fell dramatically in the morning post-CPI release, they climbed back up a bit, but overall the market reacted favorably – moving the five year treasury yield back down 9 basis points to 4.32%.

PPI Report – Thursday June 13, 2024

The market moving news didn’t slow down in the second week of June, as Thursday June 13, 2024 saw the release of the Producer Price Index (PPI) Report. This report shows producer inflation, another key figure for the Federal Reserve to look at in determining when to cut rates. A lower-than expected PPI reading would indicate a higher change of rate cuts and thus lower treasury yields and mortgage rates, including interest rates on rental properties.

Well, there was a big surprise in the PPI Reading for May – coming in at 2.2% year over year (vs. 2.5% expected) and -0.2% (deflation) month-over-month (vs. 0.1% expected). Yes, 0.3% below expectations may be a small number in most contexts but it is big when it comes to inflation metrics like PPI. This further inspired bond traders to see signs of inflation easing and the five year treasury dropped down to a 4.24% close, another 8 basis points and a total of 17 over the two-day period that saw three massive market-moving moments in a 48-hour period.

PCE Inflation Report – Friday June 28, 2024

The second half of June didn’t have many economic releases that had significant effect on the bond market or mortgage rates for rental properties (or real estate in general), as vacation season heated up and political election news dominated headlines. The PCE Inflation Report for May came in at the last business day of the month – coming in at 2.6% year over year for the “Headline” and “Core” metrics – both exactly in line with expectations. The five year treasury bond did in fact drift up four basis points in the day and ended the month at 4.33%.

Stay Tuned for July 2024 Updates

July 2024 – despite the Independence Day holiday sitting in the middle of the first week – has already seen continued ups and downs for mortgage rates – make sure you sign up for our newsletter, bookmark this page and follow the author of this piece on X to stay up to date on the cutting edge of the ups and downs of rates for rentals!