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Mortgage rates stable heading into next Fed meeting

Mortgage rates were stable this week as the Federal Reserve prepares for a meeting next week where the latest inflation numbers and a potential tapering of the Fed’s mortgage bond purchases are likely to be on the agenda.

For the week ending June 10, Freddie Mac’s weekly Primary Mortgage Market Survey reported average rates for the following types of loans:

  • For 30-year fixed-rate mortgages, rates averaged 2.96 percent with an average 0.7 point, down from 2.99 percent last week and 3.21 percent a year ago. Rates for 30-year loans hit an all-time low of 2.65 percent in records dating to 1971 during the week ending Jan. 7, 2021.
  • Rates on 15-year fixed-rate mortgages averaged 2.23 percent with an average 0.6 point, down from 2.27 percent last week and 2.62 percent a year ago. The all-time low for 15-year fixed rate mortgages in records dating to 1991 was also seen during the week ending Jan. 7, 2021, when rates averaged 2.16 percent.
  • For 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 2.55 percent with an average 0.2 point, down from 2.64 percent last week and 3.10 percent a year ago. Rates on 5-year ARM loans hit an all-time low of 2.56 percent during the week ending May 2, 2013, in Freddie Mac records dating to 2005.

Source: Freddie Mac Primary Mortgage Market Survey.

Mortgage rates surged in February and March on fears that the Federal Reserve will soon take steps to counter inflation. The latest numbers out Thursday from the U.S. Bureau of Labor Statistics show the Consumer Price Index was up 5.0 percent from a year ago in May, the biggest annual increase since August, 2008.

Mortgage rates eased in April and were mostly static in May, but investors are watching carefully for the Fed to begin discussions on tapering its $40 billion in monthly mortgage bond purchases, which have helped keep rates low.

The Federal Open Market Committee will hold its next meeting on June 15-16, and public comments by Fed officials in recent weeks suggests that tapering is likely to be on the agenda, CNBC reports. The Fed will telegraph any moves far in advance, in the hopes of avoiding a repeat of the “taper tantrum” of 2013 that cooled investor demand for bonds, driving up long-term interest rates.

Although a gradual rise in mortgage rates would reduce incentives for existing homeowners to refinance, an abrupt rise could also dent home sales, which already face headwinds in the form of listing shortages and record home price appreciation.

“The economy is recovering remarkably fast and as pandemic restrictions continue to lift, economic growth will remain strong over the coming months,” said Freddie Mac Chief Economist Sam Khater, in a statement. “Despite the stronger economy, the housing market is experiencing a slowdown in purchase application activity due to modestly higher mortgage rates. However, it has yet to translate into a weaker home price trajectory because the shortage of inventory continues to cause pricing to remain elevated.”

Most Americans think it’s a bad time to buy a home, but would still rather buy than rent if they had to move, according to a recent survey of consumer attitudes about housing markets and the economy by mortgage giant Fannie Mae.

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