Mortgage charges drop beneath three% once more after the rise within the earlier week

A week after mortgage rates rose above 3% for the first time since June, they fell back below that threshold.

According to the Freddie Mac Primary Mortgage Market Survey, the 30-year fixed-rate mortgage averaged 2.99% for the seven days ended October 7. A week ago, the average rose to 3.01% after spending most of the summer at nearly 2.9%. The latest rate was still higher than a year ago when the 30-year average was 2.87%.

"Mortgage rates are hovering around 3% this week due to mounting uncertainty in the economic and financial markets," said Sam Khater, Freddie Mac's chief economist, in a press release.

Despite the decline, analysts do not see any trends that suggest interest rates will remain consistently below 3% in the future.

"While the steady upward momentum in interest rates has recently flattened out over the past few weeks, markets remain cautious as a number of potentially market-moving developments emerge on the immediate horizon," Zillow economist Matthew Speakman said in a blog post.

These developments include a more promising outlook for personal spending following a better-than-expected consumer spending report in August and expected guidance from the Federal Reserve later this year on reducing bond and security purchases – originally enacted to address the Fed's economic shock counteract coronavirus. The rate of new COVID-19 cases also began to decline in mid-September after rising steadily over the summer.

Investors are waiting for the next release of US employment data, which is scheduled for Friday. "A higher-than-expected figure would equip the Federal Reserve with more ammunition to justify tightening monetary policy later this year and likely push mortgage rates higher," Speakman said.

In addition to the decline in the 30-year average, the 15-year fixed interest rate also fell by five basis points on a weekly basis, from 2.28% to 2.23%. A year ago, the 15-year average was 2.37%.

However, the 5-year floating rate Treasury index rose four basis points to 2.52% from 2.48% the previous week. But the average was lower than the same week last year when it hit 2.89%.

For borrowers, the current outlook could mean a tougher path, according to Khater, especially for those looking to make a purchase. Both the rapid pace of property prices and supply problems continue to affect the market.

“Unfortunately, with the expectation that both mortgage rates and home prices will continue to rise, competition will remain high and housing affordability will decline,” he said.

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