Average rates on the 30-year fixed-rate mortgage and 5/1 ARM fell one basis point, while the 15-year fixed was unchanged, according to a NerdWallet survey of daily mortgage rates published by national lenders.
The 30-year fixed rate is three basis points higher than it was a week ago, and 38 basis points higher than a year ago. One basis point is one-hundredth of a percentage point.
The direction of mortgage rates depends partly on the Federal Reserve’s policy on short-term interest rates. The Fed’s rate moves don’t directly affect long-term mortgage rates, but they do influence investors’ expectations of overall economic growth. And those expectations, in turn, affect mortgage rates.
Fed members disagree on inflation growth
But it turns out that the rate-policy setters at the Fed are confused about inflation, and about how fast they should raise short-term interest rates to keep prices steady. This was made clear in the minutes, released Wednesday, from the Fed’s September rate policy meeting.
The Fed’s target inflation rate is 2%, and it is currently lingering below that. Members of the rate policy committee had a discussion — reading between the lines, it seems that it was lively — about the causes of persistently low inflation. They debated whether inflation will speed up over the next few months or if it will remain below the central bank’s 2% target for longer than desired.
December increase on the chopping block?
“It was also noted that the persistence of low inflation might result in the federal funds rate staying uncomfortably close to its effective lower bound,” according to the meeting’s minutes. Translation: Low inflation could keep the federal funds rate too close to zero percent. Right now the federal funds rates is kept in a range of 1% to 1.25%. But, the minutes added, there’s a risk that the inflation rate could rise abruptly because the unemployment rate is so low.
In last month’s policy statement, the Fed kept the federal funds rate unchanged but announced that “economic conditions will evolve in a manner that will warrant gradual increases” in the rate. But with the release of the meeting’s minutes, we know that some committee members “thought that additional increases in the federal funds rate should be deferred” until inflation is clearly on the rise.
The debate in the halls of the Fed is likely to continue, but the general consensus from the CME Group is that the Fed will raise short-term rates following their December meeting.
MORTGAGE RATES TODAY, THURSDAY, OCT. 12:
NerdWallet daily mortgage rates are an average of the published annual percentage rate with the lowest points for each loan term offered by a sampling of major national lenders. APR quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.
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