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: Mortgage rates barely move. Investors await Fed’s next steps amid concerns about omicron and inflation

Mortgage rates have barely budged in weeks — but that could change as the Federal Reserve is set to meet next week.

The 30-year fixed-rate mortgage averaged 3.1% for the week ending Dec. 9, down one basis point from the previous week, Freddie Mac
FMCC,
-2.94%

reported Thursday. The 15-year fixed-rate mortgage fell by the same amount to an average of 2.383%. The 5-year Treasury-indexed adjustable-rate mortgage, meanwhile, averaged 2.45%, down four basis point from the previous week.

“Going forward, the path that rates take will be directly impacted by more information about the omicron variant as it is revealed and the overall trajectory of the pandemic,” said Sam Khater, chief economist at Freddie Mac, in this week’s report. “In the meantime, rates remain low and stable, even as the nation faces declining housing affordability and low inventory.”

Long-term bond yields, including the 10-year Treasury note
TMUBMUSD10Y,
1.485%
,
fluctuated over the past week, responding to mixed signals on the labor market and positive indications regarding the effectiveness of certain treatments to the latest strain of the virus that causes COVID-19.

The variant isn’t the only factor that’s set to influence interest rates in the near future. The latest edition of the consumer price index will be released Friday, which will provide insight as to the pace of inflation. That could influence central bankers when the Federal Reserve meets next week. That meeting could determine how quickly the Fed tapers its asset-purchasing activities and hikes short-term interest rates.

“With markets now anticipating the Federal Reserve to be more hawkish in fighting inflation, expectations for accelerated bond purchase tapering and rate hikes are beginning to be priced into rates markets,” said Paul Thomas, vice president of capital markets at Zillow
Z,
-3.40%

ZG,
-3.49%
.

The latest data on mortgage applications suggests that the pace of home sales remains strong, even in spite of growing affordability challenges. Whether that trend will continue into 2022 will depend on how robustly interest rates respond to changes in the country’s fiscal policy.

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