After falling to their lowest level in five months, mortgage rates inched slightly higher this week, Zillow reports.
Mortgage rates had followed a consistent downward trajectory since the beginning of July, holding firm despite a decent June jobs report and more hints that the Federal Reserve is leaning towards tightening monetary policy earlier than previously expected. Investors appeared to be reconsidering their outlooks for long-term growth as they gauged the potential for more government stimulus and weighed the risks posed by the delta variant of COVID-19. Another historically strong inflation report released this week helped nudge rates higher in recent days, a move that was assisted by soft demand at an auction of 30-year U.S. Treasurys. Weak demand for Treasurys causes yields to rise which, generally, places more upward pressure on mortgage rates.
However, despite this week’s uptick, mortgage rates remain very low and the factors that were influencing them higher earlier in the year appear to be waning, limiting the risk of a near-term spike. Rates continue to offer only muted reactions to historically high inflation readings, and investors’ expectations for inflation have plateaued in the last couple months. All told, absent any surprisingly strong data, a shift in tone from the Fed, or unexpected pandemic-related developments, these recent increases in mortgage rates are likely to remain modest.