By Crissinda Ponder • Bankrate.com
Interest rates on mortgages inched higher this week, just a day before the Federal Reserve’s policy-setting committee decides whether the federal funds rate will increase for the first time in nearly a decade.
Is today the day?
The Fed likely won’t announce a rate increase today, says Dick Lee, founder and president of Independent Mortgage in Newton, Massachusetts.
“I do see them increasing (the federal funds rate) by the end of the year by anywhere from 0.125% to 0.25%,” he says.
Two issues could stop the central bank from initiating a rate hike: low inflation and market volatility, says Joel Naroff, president and chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
“While inflation is not accelerating, it is not so far from the target that the Fed couldn’t fudge things,” he says. “Indeed, the uncertainty over rate hikes is probably the major cause of the volatility. So, the Fed should raise rates (today), even if the members have not synced their messages with that action very well.”
Retail and food services sales in August rose at a seasonally adjusted pace of 0.2% from July and 2.2% from the same time last year, according to data released this week from the U.S. Census Bureau. Additionally, July 2015 sales were revised upward.
“People ate at home and in restaurants, bought clothes and electronics, but stayed away from furniture and homebuilding stores,” Naroff says. “Essentially, after a very strong July, people continued to spend in August.”
Positive data has led to lower demand for government bonds, which pushed yields higher. The 10-year Treasury note yield rose from around 2.17% Monday morning to 2.3% Wednesday afternoon, according to CNBC. Mortgage rates are closely tied to long-term Treasury yields.
The benchmark 30-year fixed-rate mortgage rose to 4.06% from 4.05%, according to Bankrate’s Sept. 16 survey of large lenders. A year ago, it was 4.33%. Four weeks ago, the rate was 4.06%. The mortgages in this week’s survey had an average total of 0.23 discount and origination points. Over the past 52 weeks, the 30-year fixed rate has averaged 4.01%. This week’s rate is 0.05 percentage points higher than the 52-week average.
The benchmark 15-year fixed-rate mortgage rose to 3.25% from 3.23%.
The benchmark 30-year fixed-rate jumbo mortgage rose to 3.97% from 3.92%.
The benchmark 5/1 adjustable-rate mortgage rose to 3.28% from 3.24%.
