Mortgage Rates Drop Slightly

NMortgage rates moved modestly lower this week, with the benchmark 30-year fixed mortgage rate slipping to 3.62 percent, according to Bankrate.com’s weekly national survey. The 30-year fixed mortgage has an average of 0.20 discount and origination points.

The larger jumbo 30-year fixed nosed higher to 3.63 percent, while the average 15-year fixed mortgage rate held steady at 2.91 percent. Adjustable mortgage rates were mixed, with the 3-year ARM rising to 3.24 percent, while the 5-year and 7-year ARMs retreated to 3.09 percent and 3.28 percent, respectively.   

Mortgage rates were little changed ahead of a much-anticipated meeting of the Federal Open Market Committee, the Federal Reserve’s rate-setting committee. The Fed did not raise interest rates, despite giving an upbeat assessment of the economy. However, they did send a strong signal that a rate hike is coming perhaps as soon as December. In addition to pointing out that inflation remains below their intended target, the Fed’s economic projections released following the meeting revealed that they aren’t expecting core inflation to hit 2 percent until 2018. The combination of no rate hike now, low inflation, very modest increases in inflation, and a possible short-term rate hike later this year is good news for long-term bonds, and by extension, mortgage rates. Higher inflation erodes the value of the fixed payments bondholders receive, but projections of low inflation and measures to keep it in check tend to push yields lower. Mortgage rates are closely related to yields on long-term government bonds.