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Homebuyers and refinancers have received a belated gift from the Fed: Mortgage rates have fallen because the Federal Reserve reassured bond investors that it won't raise short-term interest rates aggressively.
This decline in mortgage interest rates might not last, because in the long run, rates are trending upward. If you're ready to get a mortgage, this is a good time to do it.
Why rates rose and fell
Early last week, mortgage rates went up more than they normally would have. Why? Because investors were worried what the Fed would say later in the week, at the conclusion of the central bank's scheduled meeting.
Like most Fed-watchers, mortgage bond investors predicted that the monetary policy committee would signal that it was staying with its plan to raise short-term interest rates three times this year. That prediction turned out to be correct. But there was an outside chance that the Fed would hint that it wanted to raise short-term rates four times in 2017.
Given the possibility that the Fed might accelerate its rate-raising campaign, mortgage rates rose higher than they otherwise would have. Once the Fed signaled that it would raise short-term rates gradually and patiently, mortgage rates immediately dropped.
It was as if the mortgage market had been holding its breath, and then exhaled in relief. As rates fell, homebuyers applied for mortgages.
Mortgage rates this week
The benchmark 30-year fixed-rate mortgage dropped this week to an average 4.29 percent from 4.44 percent, according to Bankrate's weekly survey of large lenders. A year ago, it was 3.9 percent. Four weeks ago, the rate was 4.29 percent.
The mortgages in this week's survey had an average total of 0.24 discount and origination points.
Over the past 52 weeks, the 30-year fixed has averaged 3.88 percent. This week's rate is 0.41 percentage points higher than the 52-week average.
- The 15-year fixed-rate mortgage fell to 3.49 percent from 3.64 percent.
- The 5/1 adjustable-rate mortgage fell to 3.44 percent from 3.60 percent.
- The 30-year fixed-rate jumbo mortgage fell to 4.22 percent from 4.43 percent.
Weekly national mortgage survey
|This week's rate:||4.29%||3.49%||3.44%|
|Change from last week:||-0.15||-0.15||-0.16|
|Change from last week:||-$14.59||-12.18||-$14.75|