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: Mortgage rates in holding pattern as housing markets start to return to normal

Mortgage rates held steady again this week, as all eyes remain on the Federal Reserve and what it will do next.

The 30-year fixed-rate mortgage averaged 2.87% for the week ending Sept. 2, unchanged from the previous week, Freddie Mac
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+0.22%

reported Thursday. Mortgage rates are now roughly in line with their level from last year — a year ago, the 30-year loan averaged 2.93%.

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

Throughout the week, rates moved higher and then lower, reflecting investors’ anxiety over the Fed’s future plans for its stimulus efforts. Prior to the central bank’s Jackson Hole conference, there were thoughts that the Fed may take a more hawkish turn, but that didn’t materialize.

“Fed Chair Jerome Powell said that while a modest tightening of policy would likely be necessary by the end of the year, the central bank remains far from taking more drastic efforts, such as increasing interest rates,” said Zillow
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+0.56%

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+0.79%

senior economist Matthew Speakman. “Bond yields retreated slightly following the statement and mortgage rates followed suit, even as fresh inflation data showed firm price pressures persist.”

Mortgage rates roughly follow the direction of long-term bond yields, including the 10-year Treasury
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1.293%
.

Ultimately, the future direction of mortgage rates could depend on Friday’s monthly jobs report. A strong report could push up the calendar for tapering of the Fed’s stimulus efforts, which includes purchases of assets such as mortgage-backed securities. Those asset purchases have pumped money into the mortgage market, which allowed lenders to drop rates as low as they have over the course of the COVID-19 crisis.

“I expect rates to float near the 3.0% mark until the Fed takes a clear stance on asset purchases, but with tapering on the menu, I see rates making a jump toward the end of 2021,” said George Ratiu, manager of economic research at Realtor.com.

The good news for home buyers is that any rise in rates would come at a time when home prices are already beginning to cool, ever so slightly. More listings are coming to the market these days, which is alleviating some of the supply crunch that prompted record increases in home prices.

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

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