Mortgage rates increased this week due to concerns about inflation and speculation on the Federal Reserve’s actions.
The average rate for a 30-year fixed-rate mortgage went up by 11 points to 6.68% APR in the week ending Sept. 3, according to data from Zillow provided to BW. We calculate our weekly average using daily APRs recorded over the past five business days.
Prior to the recent conflict, mortgage rates were already on the rise. It’s important to understand why rates are increasing, what could impact them next, and what you need to know if you’re thinking about buying a home or refinancing.
September Fed outlook changes
Mortgage rates received a significant boost last Friday after Federal Reserve Chair Kevin Warsh spoke at the annual Kansas City Fed event in Jackson Hole, Wyoming. Market participants were eager for insight into Warsh’s monetary policy plans.
Warsh’s stance on inflation has been consistent, emphasizing the Fed’s commitment to maintaining stable prices. He suggested that short-term interest rates are crucial for achieving the Fed’s dual mandate of maximum employment and price stability.
Although the Fed doesn’t directly control mortgage rates, its decisions on the federal funds rate can have a major impact. Lenders often adjust their rates in anticipation of Fed actions, leading to immediate changes in mortgage rates.
The Bureau of Labor Statistics will release the August Employment Situation Summary, also known as “the jobs report,” tomorrow morning. This report holds significance as the previous numbers were disappointing, with the economy losing 23,000 jobs in July, far below economists’ predictions. The revisions of May and June’s numbers downward add to the importance of the upcoming August report.
The outcome of the August report could either confirm July as an anomaly or signal the start of a concerning trend. A negative report might prompt the Fed to consider a rate hike, as raising the funds rate is a tool to combat inflation, while cutting it can support the labor market. The Fed could also opt to keep rates steady to monitor the situation further.
A decrease in the likelihood of a September rate hike could alleviate some pressure on mortgage rates. However, other factors like the escalating tensions with Iran could still keep rates elevated.
There is already variability in mortgage rates, with some lenders offering rates starting in the high sixes and others already advertising rates in the sevens. Shopping around and comparing quotes from multiple lenders is crucial to finding the best rate, as even a small difference in rates can lead to significant savings in the long run. following sentence:
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