Mortgage rates continue to move sideways

Washington Post

Mortgage rates seem to be languishing as summer winds down.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average edged up to 2.87% with an average 0.6 point. (Points are fees paid to a lender equal to 1% of the loan amount. They are in addition to the interest rate.) It was 2.86% a week ago and 2.91% a year ago. The 30-year fixed average has remained below 3% the past two months. The 15-year fixed-rate average moved slightly higher to 2.17% with an average 0.6 point. It was 2.16% a week ago and 2.46% a year ago. The five-year adjustable rate average slipped to 2.42% with an average 0.2 point. It was 2.43% a week ago and 2.91% a year ago.“When you come to rest after a bungee jump, you oscillate up and down slightly,” said Holden Lewis, home and mortgage specialist at NerdWallet. “That’s what mortgage rates look like nowadays. The pandemic’s threat to the economy tugs rates down and the prospect of tighter monetary policy pulls them up. The net result is a relative standstill that will remain until the Federal Reserve decisively hoists mortgage rates higher.”

Mortgage rates tend to follow the same path as long-term bond yields, though that has been less the case recently. The yield on the 10-year Treasury had been stuck below 1.3% since Aug. 13. But then on Wednesday, it jumped to 1.35%, its biggest one-day gain in more than two weeks. The move came too late to affect the Freddie Mac survey, which is done early in the week.

“The 10-year Treasury … has been trading in a narrow range for the last 30 days and has had a bumpy ride down for the last 90 days from around 1.6%,” said Mitch Ohlbaum, mortgage banker at Macoy Capital Partners. “All of the anticipation is coming from the [Jackson Hole Economic Symposium] later this week about the tapering of the [Federal Reserve] bond-buying program, and my bet is that [Fed] Chairman [Jerome] Powell will take a wait-and-see approach. There really is no other way to play this without more data about the U.S. and global economies.”

Investors are eagerly anticipating what Powell will say at the symposium on Friday. If he discloses the central bank’s plans to wind down – or taper – its bond-buying program, that could have an outsize effect on mortgage rates.

“Friday could be an interesting day if Fed Chairman Powell signals the start of tapering,” said Gordon Miller, owner, Miller Lending Group. “Since I don’t believe that will be the case, rates should remain in a narrow range well into September before the Fed signals whether or not they will begin to taper at their November meeting.”

Danielle Hale, chief economist at Realtor.com, said the financial markets are continuing to digest the minutes from July’s Federal Reserve meeting while they await Powell’s remarks.

“Investors are waiting for a reason to go in a new direction, and while we may get this from Fed Chair Powell’s speech on Friday, it’s more likely that incoming data this fall will be what causes rates to move,” she said. “Rates will begin to climb if we make continued progress in fighting the pandemic, which would suggest that the economy will remain on track, and while less likely, rates could falter if covid cases continue to increase.”

Bankrate.com, which puts out a weekly mortgage rate trend index, found half the experts it surveyed predict rates will hold steady this week.

“Despite the grave uncertainty taking place in Afghanistan, mortgage bonds are not reacting in typical fashion to the negative news,” said Elizabeth Rose, sales manager at AmCap Mortgage. “As long as bonds can maintain current levels and not breach the next support level, rates will remain the same.”