The average 30-year-fixed mortgage rose, ever so slightly, to 2.88% for the week ending Sept. 23, according to Freddie Mac‘s latest PMMS survey. Mortgage rates have been roughly flat for months now.
“The slowdown in economic growth around the world has caused a flight to the quality of the U.S. financial markets,” said Sam Khater, Freddie Mac’s chief economist. “This has led to a rise in foreign investor purchases of U.S. Treasuries, causing mortgage rates to remain in place, despite the increasing dispersion of inflation across different consumer goods and services.”
Khater said that homebuyers are soaking up all available inventory, which has improved slightly, while home-price growth is also moderating. But what little progress builders have made may falter in the months to come, Khater said.
“The next few months will be choppy as several home builders are signaling that they are going to deliver less supply amid labor and materials shortages,” Khater said.
The previous week, mortgage rates were flat at 2.86%, moving in line with the 10-year Treasury Yield Curve, which has been steady at around 1.32 for the past two weeks. The 10-year Treasury Yield for Sept. 22 was 1.32.
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A year ago at this time, the 30-year fixed-rate mortgage averaged 2.90%. The 15-year fixed-rate mortgage averaged 2.15%, up from last week when it averaged 2.12%.
Mortgage rates have been in a deadlock for the past two months, struggling to crest 3%, despite expectations that 2021 would bring higher levels. Rates are, in part, kept low as a result of the Federal Reserve’s consistent monthly asset purchases. But that may soon change.
This week, the Federal Reserve signaled it would reduce its monthly asset purchases, which will push up mortgage rates. The central bank has said it would adjust its $120 billion in monthly purchases of U.S. Treasury bonds and mortgage backed securities only when substantial further progress is made in the labor market.
“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the bank said. In a press conference, Federal Reserve Chair Jerome Powell said the tapering would conclude in the middle of next year.
Meanwhile, the housing market continues to lure buyers seeking their dream home as well as those looking to reduce their monthly payments through a mortgage refinancing.
Mortgage loan application volume grew by 4.9% for the seven days ending Sept. 17, according to the Mortgage Bankers Association.
Mortgage application activity reached its highest in a month, with purchase applications jumping to heights last seen in April, the MBA said.
Joel Kan, associate vice president of economic and industry forecasting at MBA, said that the continued rise in home prices has not dampened housing demand.
“Housing demand is strong heading into the fall, despite fast-rising home prices and low inventory,” said Kan. “The inventory situation is improving, with more new homes under construction and more homeowners listing their home for sale.”
However, Kan did note that despite the uptick in activity, purchase applications “were still 13% lower than the same week a year ago.”
Despite sustained homebuyer interest, the market continues to struggle with a lack of inventory. Existing-home sales shrank by 2% in August, after two straight months of increases, according to a report by the National Association of Realtors.
Lawrence Yun, chief economist at NAR, noted in a statement that existing home sales slipped because of rising prices nationwide. But that has not stopped hopeful homebuyers searching.
“Although there was a decline in home purchases, potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory,” Yun said.
Mike Fratantoni, MBA’s senior vice president and chief economist, said that the more than 700,000 homes under construction may help to alleviate the supply-demand mismatch.