Mortgage rates show little movement as investors remain cautious

Mortgage rates remained relatively flat, consistent with their late-summer trend, as latest monthly inflation data did little to move the needle.

The 30-year fixed-rate mortgage inched down two basis points to 2.86% from 2.88% for the period from Sept. 10-16, according to the latest Freddie Mac Primary Mortgage Market Survey. The latest average is at a similar level compared to the same week one year ago when it stood at 2.87%.

“It’s Groundhog Day for mortgage rates, as they have remained virtually flat for over two months.” said Sam Khater, chief economist at Freddie Mac, in a press release. “The holding pattern in rates reflects the markets’ view that the prospects for the economy have dimmed somewhat due to the rebound in new COVID cases.”

Latest numbers from the Centers for Disease Control showed the amount of new COVID-19 cases one week ago elevated by more than 1,000% from lows at the beginning of the summer. While the headline numbers cooled consumer sentiment and slowed the pace of the U.S. economic recovery, the CDC data also pointed to a slow retreat on a week-over-week basis, with cases decreasing 12.7%. A continued downward trajectory in cases may finally correspond to interest-rate shifts, according to Matthew Speakman, Zillow economist.

“While COVID cases remain elevated, they are showing some early signs of plateauing — news that is undoubtedly good for the world, but could place more upward pressure on mortgage rates,” Speakman said in a blog post.

Meanwhile, Consumer Price Index data released this week showed inflation slowing on a month-over-month basis in August, with prices rising a seasonally adjusted 0.3% compared to 0.5% in July. But core inflation numbers, which exclude volatile gasoline and food prices, rose only 0.1%, the smallest increase since February. On a yearly basis, inflation increased 5.3%, the same pace as in July.

“A softer-than-expected August inflation reading this week likely lowered the odds that the Fed announces any immediate moves to tighten policy at their upcoming September conference,” Speakman added. “But the fact that interest rates haven’t moved much in recent weeks indicates that investors are still waiting for more certainty.”

Earlier this summer, the Federal Reserve dropped hints that it might be ready to pursue further tightening of monetary policy, including tapering its purchases of mortgage-backed securities and other bonds. But consistent with its cautious approach throughout the COVID-19 pandemic, the central bank has provided no timelines for either asset tapering or potential rate hikes.

The ambiguity between fluctuating data and economic hopes this summer have left many in the mortgage industry guessing at how markets might react. “All told, there’s a good chance that mortgage rates will move notably in the coming weeks, but the jury’s still out on which direction they’ll head,” Speakman said.

The 15-year fixed rate mortgage average also dropped from the prior week, falling to 2.12% from 2.19%. During the same week in 2020, the 15-year rate came in at 2.35%.

The 5-year Treasury-indexed adjustable-rate mortgage climbed week over week, increasing nine basis points to 2.51% from 2.42%. One year ago, the 5-year ARM averaged 2.96%.