Investor Alert

Feb. 11, 2021, 10:24 a.m. EST

Mortgage rates remain near historic lows — will they go lower?

Jacob Passy

Mortgage rates have held steady the past couple of weeks after a somewhat turbulent start to the year. Where they go from here will depend largely on how the country handles getting the economy back on track.

The 30-year fixed-rate mortgage averaged 2.73% for the week ending Feb. 11, Freddie Mac (OTC:FMCC) reported this week . It is the third consecutive week that the 30-year rate has remained at that level.

The 15-year fixed-rate mortgage fell two basis points to an average of 2.19%, while the 5-year Treasury-indexed hybrid adjustable-rate mortgage rose one basis point to 2.79%. All in all, though, rates for the 15-year fixed-rate and 5-year adjustable-rate mortgages have also barely moved in the past couple weeks.

Prior to this month, rates had been on an upward trajectory, driven by expectations that the economy was improving and that lawmakers in Congress would pass another round of stimulus funding. “Rates leveled off in recent days, rising slightly following a lackluster jobs report and slipping on Wednesday after inflation data showed price pressures remained tame,” said Matthew Speakman, an economist with Zillow (NAS:Z) (NAS:ZG) .

In particular, the low rate of inflation makes it less likely that the Federal Reserve will adjust its monetary policy, Speakman said. The Fed does not directly control long-term interest rates like mortgage rates — rather, mortgage rates typically track the direction of long-term bond yields and respond to investors’ appetite for bonds such as the 10-year Treasury note. However, expectations of the Fed’s policy shifts are typically baked into the yields on those bonds, and so trickle down into mortgage rates.

So without the Federal Reserve making any moves, what will influence mortgage rates higher or lower? It could come down to Congress.

“All told, after a topsy-turvy start to the year, mortgage rates have stabilized of late and appear to be waiting for more signals of the economy’s path forward before heading definitively in either direction,” Speakman said. “In the near-term, that path forward will depend largely on the fate of the next wave of fiscal relief and COVID-19 vaccine developments.”

If the economy does show signs of improvement in the weeks and months to come, then rates will likely head higher. And that’s especially bad news for folks trying to buy a home — particularly first-time buyers.

“Today’s housing markets are struggling with a massive shortage of available homes,” said George Ratiu, senior economist at Realtor.com. “As uncertainties over the vaccine combine with lingering financial hardships for many Americans, the number of new home listings is diminishing at a double-digit pace compared with a year ago.”

With so few homes for sale, competition for the listings that are available is fierce. That’s driven prices higher, and rising mortgage rates would only lead to more buyers being priced out of the market.

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