Mortgage Rates Dip Following Fed Announcement

Mortgage rates retreated on hopes that consistent interest rate increases are winding down. The average 30-year fixed rate mortgage dropped from 6.39 percent to 6.34 percent, according to Bankrate.com’s weekly national survey of large lenders. The 30-year fixed rate mortgages in this week’s survey had an average of 0.39 discount and origination points.

The average 15-year fixed mortgage rate decreased in a similar fashion, slumping from 5.95 percent to 5.92 percent. The average jumbo 30-year fixed rate fell from 6.57 percent to 6.51 percent. Adjustable rate mortgages dipped slightly, with the average 5/1 adjustable rate mortgage sliding from 5.89 percent to 5.88 percent, and the average one-year ARM slipping from 5.56 percent to 5.53 percent.

The Federal Open Market Committee’s post-meeting statement issued Dec. 13 hinted that interest rates are now at a neutral level that neither helps nor hinders the economy, but stated that further increases may be needed to keep inflation under wraps. The acknowledgement that an end to interest rate hikes may be near was enough to push yields on ten-year Treasury securities and fixed mortgage rates lower. Mortgage rates are closely related to yields on long-term government bonds.

Fixed mortgage rates have increased compared to one year ago, but remain attractive in a historical context. Twelve months ago the average 30-year fixed mortgage rate was 5.69 percent, meaning that the monthly payment on a loan of $165,000 was $956.62. With the average 30-year fixed rate now 6.34 percent, the same loan would now carry a payment of $1,025.61. The decreased buying power brought about by higher mortgage rates could weigh on the housing market as borrowers grapple with higher interest rates on other obligations such as home equity lines, credit cards, and student loans.