By Jacob Passy
Mortgage rates continue to hover near their all-time low. And the Federal Reserve’s approach to the economic recovery might keep them lower for longer.
The 30-year fixed-rate mortgage average 3.21% for the week ending June 11, up three basis points from a week earlier, Freddie Mac (OTC:FMCC) reported Thursday.
Meanwhile, the 15-year fixed-rate mortgage and the 5-year Treasury-indexed hybrid adjustable rate mortgage were both unchanged from last week at 2.62% and 3.1% respectively.
Mortgage rates hit a fresh record low at the end of May, when the 30-year rate dropped to 3.15%. It was the third time that rates hit an all-time low this year.
Last week, mortgage rates appeared primed to increase substantially in the wake of the better-than-expected monthly jobs report, said Matthew Speakman, an economist at Zillow (NAS:ZG) . “Just last week, mortgage rates appeared to be trending upward, rising quickly from all-time lows to their highest level in just under a month,” Speakman said. “But all that changed in the last few days.”
‘With no end in sight for this Fed policy, it’s likely that mortgage rates are poised to remain low for a while.’
Matthew Speakman, Zillow economist
The Federal Reserve indicated Wednesday that it will keep the federal funds rate steady at a range of 0% to 0.25% through at least 2021. “We’re not even thinking about thinking about raising rates,” Fed Chairman Jerome Powell said during a press conference as the Fed updated its economic forecast.
The Fed controls short-term interest rates, so the policy won’t directly impact mortgage rates. Instead, mortgage rates roughly track the direction of long-term bond yields, including the 10-year Treasury note (XTUP:BX:TMUBMUSD10Y) . The yield on the 10-year note initially fell in response to the Fed’s announcement.
More notably for the mortgage market, Powell also said the Fed will continue buying mortgage-backed securities “at least at the current pace.”
That will continue to pump liquidity into the mortgage market, which lenders will use to continue to offer low rates to attract borrowers. “With no end in sight for this Fed policy, it’s likely that mortgage rates are poised to remain low for a while,” Speakman said.