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Mortgage rates today: Monday, November 29, 2021
On Monday, Nov. 29, 2021, the average interest rate on a 30-year fixed-rate mortgage dropped seven points to 3.045% APR. The average rate on a 15-year fixed-rate mortgage fell eight basis points to 2.354% APR and the average rate on a 5/1 adjustable-rate mortgage jumped seven basis points to 2.791% APR, according to rates provided to NerdWallet by Zillow. The 30-year fixed-rate mortgage is three basis points higher than one week ago and 19 basis points higher 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 fell during the week ending Nov. 24, with the average five-year adjustable-rate dipping below 3% for the first time since March.
The 30-year fixed-rate mortgage averaged 3.03% APR, down four basis points from the previous week's average.
The 15-year fixed-rate mortgage averaged 2.35% APR, down four basis points from the previous week's average.
The five-year adjustable-rate mortgage averaged 2.56% APR, down 53 basis points from the previous week's average.
While mortgage rates remain at historically low levels, high housing prices and a dearth of homes for sale continue to test buyers. The median price for existing homes — those that were owned and occupied before going on the market — was $353,900 in October, up 13.1% year over year, according to the National Association of Realtors. October marked the 15th straight month in which median prices increased by double-digit percentages over the prior year.
Prices rose across the country, with the South posting the largest annual increase, the NAR reported. The regional median existing-home prices and year-over-year increases last month were:
Northeast: $379,100, up 6.4%.
Midwest: $259,800, up 7.8%.
South: $315,500, up 16.1%.
West: $507,200, up 7.7%.
Meanwhile, the inventory of homes on the market shrunk. The number of unsold homes fell 0.8% from September and was down 12% from one year ago.
Although total sales of existing homes rose for the second straight month in October, they were down 5.8% from a year ago, according to the NAR.
November mortgage rates forecast
After climbing solidly higher in October, mortgage rates are likely to continue rising in November, but not as steeply.
The average rate on the 30-year fixed-rate mortgage was 3.04% in October, a significant increase from September's average of 2.91%. It was the biggest one-month increase since March, when vaccine rollouts were nurturing optimism. But in October, a not-so-optimistic force nudged rates higher: inflation.
Prices rose 5.4% year over year in September, according to the most recent Consumer Price Index report. It was the highest CPI figure since July 2008. The Federal Reserve's favored inflation report, known as the Personal Consumption Expenditures: Chain-type Price Index, was up 4.3% year over year in August, the highest reading since January 1991.
Why inflation pushes rates higher
Your mortgage lender strives to charge an interest rate that's higher than the expected long-term inflation rate. Otherwise, inflation will eat into the lender's profits. Think of it this way: You lend a friend $10 for lunch and your friend pledges to repay it in a year at 3% interest. A year later, your friend hands you the promised $10.30. But if that same lunch now costs $10.54, you came out on the losing side of that loan. You got a 3% return, but it was exceeded by 5.4% inflation.
Whether you measure it using the CPI or the PCEPI, inflation has risen steeply this year. That, by itself, is enough to lift mortgage rates. Meanwhile, the Federal Reserve's presence in financial markets contributed to October's mortgage rate increases.
Setting a match to the taper
When the COVID-19 pandemic provoked a recession early in 2020, the Fed responded aggressively. It slashed its benchmark federal funds rate to near zero. It also has been buying billions of dollars' worth of government and mortgage debt every month, which effectively set a ceiling on interest rates for mortgages and other types of loans.
The Fed is expected to start scaling back, or "tapering," the purchases of government and mortgage debt. Fed officials have signaled that the process may begin in November and conclude by the middle of 2022. Because the debt purchases are intended to help keep interest rates low, reducing those purchases might allow interest rates to rise. It's as if mortgage rates were a kite and the Fed was letting out a couple more feet of string.
The mortgage market tries to anticipate future Fed actions, rather than reacting to the Fed's moves after the fact. So October's rise in mortgage rates is partially due to investors' expectations that the Fed will begin tapering in November. Once the Fed makes it official, the effect on mortgage rates may be minimal because the market will have expected it.
Inflation is likely to remain, though, pushing mortgage rates slightly higher in November.
What happened in October
At the beginning of October, I predicted that mortgage rates would rise because investors would become increasingly convinced that the Fed would start tapering, causing them to demand higher interest rates. This was correct.