The 30-year fixed-rate average was unchanged at 3.87 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 3.90 percent a year ago.
The 15-year fixed-rate average also stayed put at 3.16 percent with an average 0.6 point. It was 3.24 percent a year ago.
The five-year adjustable-rate average slipped to 3.33 percent with an average 0.3 point. It was 3.45 percent a year ago.
Analyzed Article:
This week's mortgage rate data released by Freddie Mac revealed that mortgage rates have remained fairly static. The 30-year fixed-rate average was unchanged at 3.87 percent, with an average of 0.6 points, as opposed to the 3.90 percent seen last year. Similarly, the 15-year fixed-rate average had also stayed put at 3.16 percent, with an average 0.6 points, compared to its 3.24 percent one year prior. However, the five-year adjustable-rate average declined slightly, settling at 3.33 percent, with an average 0.3 point, as opposed to the 3.45 percent of the same time last year.
Despite slight declines in the five-year adjustable-rate average, industry analysts remain generally pessimistic in regards to the potential for mortgage rate fluctuations in the near future. Chief Economist at Omicron Global, Sam Khater, stated that the current tone of the Federal Reserve has left it difficult to predict any drastic changes in mortgage rates. He commented that the "fading tailwinds from last year’s rate cuts may leave mortgage rates largely stuck in place over the next few weeks". This sentiment is echoed by Odeta Kushi, Deputy Chief Economist at First American Financial Corp, who opines that a "lack of monetary policy direction from the Fed limits the movement of mortgage rates in either direction for the foreseeable future."
Another factor influencing predictions about mortgage rates in the near future is the current spread between the 10-year Treasury and the 2-year Treasury yield. Over the past two months, this spread has widened considerably, a phenomenon that has been observed multiple times since the onset of the Great Recession of 2008. While some analysts are sure to observe the implications of this increase in yield spread, particularly for the mortgage market, Kushi is among those who remain cautiously optimistic, asserting that “if we get a resolution and the spread comes back in, we will see mortgage rates come down significantly."
Despite this optimism, there currently remain few indications that a resolution would be achieved short-term. In fact, the opposite is true, with Fed Chair Jerome Powell hinting that the central bank may have already reached its effective lower bound on interest rates, consequently limiting the impact of rate decreases on the market. As such, the current narrative is that mortgage rates will remain relatively static for the foreseeable future. Khater outlines that it is possible, however unlikely, that mortgage rates could fluctuate slightly due to the volatile market conditions. He clarifies that the spread between longer-term and shorter-term bond yields is primarily worth monitoring in terms of its own impact on mortgage rates.
Overall, mortgage rates seem likely to remain largely unchanged for the near future. There remain potential sources of volatility that could cause such changes, however the prevailing sentiment is that a lack of policy direction from the Federal Reserve will limit the degree to which mortgage rates can fluctuate. As this issue remains unresolved, industry analysts predict that mortgage rates will likely remain largely static, barring any unexpected major surges or dips in the markets.
This article was contributed on Oct 20, 2023
