This week, mortgage rates have slightly decreased, but the future outlook has become more uncertain.
The average rate for a 30-year fixed-rate mortgage dropped by two basis points to 6.33% APR in the week ending Oct. 2, based on data from Zillow provided to BW. A basis point equals one one-hundredth of a percentage point.
The major news this week was the government shutdown on Wednesday. While this doesn’t have a direct impact on mortgage rates, it will influence the economy, which will, in turn, affect rates. The shutdown also adds uncertainty to predicting future movements in mortgage rates as essential economic indicators become unavailable.
Impact of the shutdown on data
Mortgage lenders rely on various factors, including crucial government economic reports, to determine mortgage rates. This data is also essential for the Federal Reserve, which has a significant role in influencing interest rates.
With the government shutdown in effect, the Bureau of Labor Statistics, responsible for key economic reports, will remain closed until the government reopens. This means that existing data won’t be released, and new data won’t be collected, making it challenging to assess the economy’s status.
If the shutdown continues, upcoming reports may be compromised. Data collection for September’s Consumer Price Index, scheduled for Oct. 15, has already been completed. However, a prolonged shutdown could hinder future data collection, making it harder to evaluate the economy’s well-being.
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Challenges for the Federal Reserve
The government shutdown adds complexity to the Federal Reserve’s decision-making process. While the Fed continues to operate, its reliance on government data for key decisions is hindered by the shutdown.
Fed Chair Jerome Powell highlighted the challenges in a speech on Sept. 23, stating that risks to inflation are rising while risks to employment are a concern. This dual risk scenario complicates the Fed’s strategy as they navigate between controlling inflation and supporting job growth.
The Federal Reserve’s upcoming meeting at the end of October will be affected by the lack of data, making it harder for policymakers to assess the economic landscape.
Opportunity for Home Buyers
The uncertainty surrounding the October mortgage rate forecast creates a unique situation for home buyers. Despite fall not being the traditional homebuying season, it presents an excellent opportunity to purchase a home.
Recent data shows an increase in monthly pending home sales in August, indicating a growing interest among buyers. Additionally, average mortgage rates in September were favorable, hovering near the lowest levels seen all year.
If you are considering buying a home, October could be the ideal time to make your move, taking advantage of the current market conditions.