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Mortgage rates today: Monday, September 20, 2021
On Monday, September 20, 2021, the average interest rate on a 30-year fixed-rate mortgage dropped two basis points to 2.896% APR. The average rate on a 15-year fixed-rate fell one point to 2.159% APR and the average rate on a 5/1 adjustable-rate rose one point to 3.171% APR, according to rates provided to NerdWallet by Zillow. The 30-year fixed-rate mortgage is eight basis points higher than one week ago and nine basis points lower than one year ago. A basis point is one one-hundredth of one percent. Rates are expressed as an annual percentage rate, or APR.
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Mortgage rates this week
Mortgage rates were more or less unchanged in the week ending Sept. 16.
The 30-year fixed-rate mortgage averaged 2.86% APR, down one basis point from the previous week's average.
The 15-year fixed-rate mortgage averaged 2.17% APR, the same as the previous week's average.
The five-year adjustable-rate mortgage averaged 3.19% APR, down one basis point from the previous week's average.
For the fourth week running, both fixed and variable mortgage rates have held steady. Labor Day has passed, kids have returned to school and, if you're far enough north, the leaves are beginning to turn — but mortgage rates are seemingly stuck in place.
While the changing of seasons is reasonably certain, the direction of the economy is much less so. If the Federal Reserve begins to slow its purchases of mortgage-backed securities, that should send rates upward. On the other hand, another coronavirus surge in the fall could hamper economic growth and keep rates low.
In the near term, we could see rates come down for home loan products that tend to have higher interest rates than the standard owner-occupied residence. This week, the U.S. Department of the Treasury and the Federal Housing Finance Agency suspended several requirements that had been in place for Freddie Mac and Fannie Mae since close to the beginning of the year.
These requirements had limited the amount of certain types of mortgages that the government-sponsored enterprises, or GSEs, could acquire. At the higher end of the market, they placed a cap on the percentage of mortgages on second homes and investment properties that the GSEs could buy. On the lower end, they limited GSE purchases of home loans for self-employed borrowers and those with modest incomes, as well as loans for multifamily housing. Mortgages for all these types of homes and borrowers tend to have higher interest rates because they entail more risk for lenders, albeit for different reasons.
Knowing that they'll be able to resell these loans to Freddie and Fannie may lead lenders to loosen some of their qualifications for these mortgages and offer borrowers better rates.
September mortgage rates forecast
Mortgage rates went up about an eighth of a percentage point in August, and I think they'll continue to rise modestly in the first half of September, then level out.
The roots of this prediction stretch all the way back to March. Rates went up sharply that month as COVID-19 vaccines rolled out and we were optimistic that the disease would soon get under control and the U.S. economy would boom. But mortgage rates fell from April through July, with peaks and valleys.
The rate on the 30-year fixed-rate mortgage bottomed out in early August at 2.77% APR. Then, it started rising, hitting 2.98% in the last full week of the month.
That's because, after the Federal Reserve’s July 27-28 meeting, Fed policymakers started talking about the timetable for reducing the amount of money the central bank adds to the banking system.
Why rate watchers focus on the Fed timetable
The Fed has been buying $80 billion in government debt and $40 billion in mortgage debt each month. The money stimulates the economy by pushing down on interest rates.
Eventually, the Fed will end these purchases. In August, mortgage rates went up merely because Fed policymakers publicly discussed how and when the purchases will end.
My prediction assumes pundits will speculate about this timetable for the first three weeks of September and mortgage rates will trend upward. I think the Fed will announce the aforementioned timetable at its monetary policy meeting that concludes Sept. 22. That's when mortgage rates will level off.
What could push rates up, down or sideways
This forecast will be wrong if the toll from COVID-19 gets a lot worse, enfeebling the economy; in that case, mortgage rates might drop.
If I'm misreading the Fed and it doesn't announce a timetable Sept. 22, and instead delays an announcement until a later meeting, mortgage rates might fall afterward.
It's also possible that mortgage rates already completed their pre-Fed climb in August and will be steady through most of September.
Finally, instead of announcing a timetable for cutting back on debt purchases later in autumn, the Fed could actually start the process soon after the September meeting. Such a surprising announcement could result in an abrupt rise in mortgage rates.
What happened in August
At the beginning of August, I said rates were "more likely to edge down than to go up," and that the 30-year fixed would dip to 2.75% APR at some point. Wrong on both counts. I predicted that the monthly average on the 30-year mortgage would be between 2.8% and 2.9%, and it ended up at the upper end of that range.
The COVID-19 pandemic did worsen in much of the U.S. during August, as I expected. Absent other factors, an accelerating epidemic would push mortgage rates lower. But the Fed's talk about reducing debt purchases pressed rates upward and turned out to be a stronger opposing force.