Mortgage rates saw a slight increase this week, primarily due to a spike on Wednesday following new data showing higher-than-expected inflation growth in July. However, rates have since settled back to a more “normal” range.
According to rates provided by Zillow to BW, the average rate on a 30-year fixed-rate mortgage rose by two basis points to 6.57% APR in the week ending Aug. 27. We calculate our weekly average mortgage rates based on daily APRs recorded over the past five business days.
Despite the recent increase in rates, there is uncertainty surrounding the Federal Reserve’s decision to raise interest rates. While forecasters initially expected a rate hike in response to factors like rising oil prices and inflation, the Fed chose not to raise rates in July. Currently, there is a 65% chance, according to CME Group’s FedWatch tool, that rates will remain unchanged in September.
While the Fed does not directly control mortgage rates, its decisions on the overnight borrowing rate can impact lender costs. Higher overnight rates typically translate to higher mortgage rates. However, if the Fed maintains current rates, lenders may be able to keep borrower costs lower.
In addition to Fed actions, other factors like the recent increase in inflation and the weakening value of the dollar could contribute to further rises in mortgage rates. Companies in the tech industry, such as Microsoft and Oracle, have been selling significant amounts of bonds to fund their AI projects, leading to increased competition for investor dollars and higher yields on government bonds.
The 10-year Treasury yield, often viewed as an indicator of economic health, serves as a benchmark for mortgage rates. As it rises, mortgage rates are likely to follow suit. Overall, while current mortgage rates may be higher than desired, strategic financial decisions, such as making a lower down payment or purchasing mortgage points, can help borrowers minimize interest payments and secure a favorable rate. Consider using the majority of the extra $8,000 to buy two discount points, potentially lowering your interest rate from 6.57% to 6.07%. This could result in breaking even on your points purchase after about five years of owning the home. Keep an eye out for positive developments in the Iran war, as mortgage lenders may respond to signs of progress towards peace talks, which could potentially lead to lower interest rates due to reduced inflation pressures. following sentence:
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