September mortgage rates forecast
Mortgage rates rose by about an eighth of a percentage point in August, and I think they will continue to rise moderately in the first half of September and then level off.
The roots of this prediction go back to March. The rates rose sharply in the month that COVID-19 vaccines were launched, and we were optimistic that the disease would soon be under control and the US economy would grow exponentially. But mortgage rates fell from April to July, with peaks and valleys.
The rate on 30-year fixed-rate mortgages hit a low in early August at 2.77% per annum. It then began to rally, reaching 2.98% in the last full week of the month.
This is because after Federal Reserve Meeting July 27-28Fed policymakers have begun talking about a timetable to cut the amount of money the central bank is adding to the banking system.
Why rating agencies pay attention to the Fed’s schedule
Fed buys $ 80 billion in government debt and $ 40 billion in mortgage debt every month. Money stimulates the economy by lowering interest rates.
Ultimately, the Fed will end these purchases. Mortgage rates rose in August only as Fed policymakers publicly discussed how and when purchases would end.
My prediction suggests that experts will reflect on this chart during the first three weeks of September and mortgage rates will tremble. I think the Fed will announce the aforementioned schedule at its monetary policy meeting that ends on September 22nd. That’s when mortgage rates will level out.
What can push rates up, down, or sideways
This prediction will be wrong if victims from COVID-19 it gets much worse, weakening the economy; in this case, mortgage rates may fall.
If I misunderstand the Fed and it does not announce the September 22 schedule, but instead postpones the announcement until a later meeting, mortgage rates could fall after that.
It is also possible that mortgage rates have already completed their rise prior to the Fed’s introduction in August and will remain stable for most of September.
Finally, instead of announcing a timetable for cutting debt purchases in late fall, the Fed could actually start the process shortly after the September meeting. Such an unexpected announcement could lead to a sharp rise in mortgage rates.
What happened in August
In early August, I said that rates were “more likely to decline than to rise,” and that the 30-year fixed income would drop to 2.75% per annum at some point. Wrong on both counts. I predicted that the monthly average on a 30-year mortgage would be between 2.8% and 2.9%, and it ended up at the top of that range.
As I expected, the COVID-19 pandemic did escalate in much of the United States in August. In the absence of other factors, the accelerating epidemic will lead to lower mortgage rates. But talk from the Fed about cutting debt purchases pushed rates higher and proved to be a stronger countervailing force.