Mortgage rates remain below 3%, but could become more volatile in the coming months

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Americans still have the opportunity to lock in ultra-low interest rates on their mortgages. The length of that opportunity could depend on what action the Federal Reserve takes to address potential inflation in the coming months. The 30-year fixed-rate mortgage averaged 2.98% during the week ending April 29, one basis point higher than the previous week, Freddie Mac FMCC reported, -0.42%, reported Thursday. The 30-year loan rate has dropped about 20 basis points since reaching its highest level since June last year at the end of March.

The 15-year fixed rate mortgage, meanwhile, increased two basis points to an average of 2.31%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.64%, 19 basis points less than the previous week. Mortgage rates have fallen in response to the movement in long-term bond yields, including the 10-year Treasury note BX: TMUBMUSD10Y, which they roughly follow. “In light of the increase in COVID cases globally, US Treasury yields stopped rising a month ago and have remained within a narrow range as the market digests incoming economic data,” he said Sam Khater, Freddie Mac’s chief economist, in the weekly report.

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“The Federal Reserve update put downward pressure on long-term bond yields, which roughly orient the direction of mortgage rates. ”

Statements made by the Federal Reserve this week regarding its interest rate policy also had an effect, putting “more downward pressure on bond yields,” said Zillow ZG, -1.00% Z, – 0.57% economist Matthew Speakman. The Fed is prepared to keep rates low for the foreseeable future. Also relevant to mortgage rates: the central bank plans to maintain its pace of buying assets, which include mortgage-backed securities. By buying those securities, the Fed injects liquidity into the mortgage market that allows lenders to make more loans at lower interest rates. However, if the expectations of the economy change, the Federal Reserve could alter its policy. “Mortgage rates are likely to be more volatile during this time period until the uncertainty about the Fed’s next moves is resolved,” said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, following the announcement of the Fed on Wednesday. . Of course, the low rates are welcome for home buyers and existing owners alike. Lower rates ease affordability constraints for buyers, which is especially important in a competitive spring home market where prices are rising rapidly. And for homeowners, the extended period with rates below 3% gives them another chance to refinance their home loan if they haven’t already.