Mortgage rates persist as housing markets begin to return to normal

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Mortgage rates have been stable again this week as all eyes are on the Federal Reserve and its next steps.

30-year fixed rate mortgages averaged 2.87% for the week ending September 2, unchanged from the previous week, Freddie Mac
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reported on Thursday… Mortgage rates are now roughly the same as last year – a year ago a 30-year loan averaged 2.93%.

15-year fixed rate mortgages have increased by one basis point over the past week to an average of 2.18%. The Treasury indexed hybrid mortgage for 5 years has increased by the same amount to an average of 2.43%.

During the week, rates rose and then fell, reflecting investor concerns about the Fed’s future stimulus plans. Before the central bank conference in Jackson Hole, there were thoughts that the Fed could take a more aggressive turn, but this did not happen.

“Fed Chairman Jerome Powell said that while a little policy tightening is likely to be needed by the end of the year, the central bank is still far from taking more drastic measures such as raising interest rates,” Zillow said.
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senior economist Matthew Speakman. “Bond yields have declined slightly since the announcement, and mortgage rates have followed suit, even as recent inflation data have shown that price pressures persist.”

Mortgage rates are roughly the same as the yield on long-term bonds, including 10-year Treasuries.
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Ultimately, the future direction of mortgage rates may depend on Friday’s monthly employment report. The strong report could push the calendar to cut back on the Fed’s stimulus measures, which include buying assets such as mortgage-backed securities. These asset purchases pumped money into the mortgage market, allowing lenders to bring rates down to the same low level as during the COVID-19 crisis.

“I expect rates to hover around the 3.0% mark until the Fed takes a clear position on asset purchases, but with the gradual tapering of the menu, I see rates will rise towards the end of 2021,” he said. George Ratiu, Manager of Economic Research. at Realtor.com.

The good news for home buyers is that any rate hike will come at a time when home prices are already starting to decline, even if only slightly. These days, more supply is coming into the market, which somewhat alleviates the supply shortage that has caused record increases in house prices.

“For first-time buyers, more options and better financing offer the promise that after a year of disappointing bidding wars, finding the right home may finally be within reach,” Ratiu said.

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