Mortgage rates declined for the second week in a row, having bounced within a narrow range since early September. This predictability is welcome news for mortgage borrowers who have faced relatively volatile rates over the past few years.
“Importantly, homeowners have noticed these consistently lower rates, driving an uptick in refinance activity,” Sam Khater, chief economist at Freddie Mac, said in a release. “Combined with increased housing inventory and slower house price growth, these rates also are creating a more favorable environment for those looking to buy a home.”
However, the government shutdown could create processing delays and other issues for homebuyers as it hits the three-week mark. Notably, the National Flood Insurance Program has suspended services during the shutdown, which means buyers in flood-prone areas may need to close their transactions without flood insurance until the government reopens.
The shutdown could also cause issues ahead of the upcoming meeting of Federal Reserve policymakers at the end of the month. That could make it more difficult for Fed officials to decide whether to cut short-term interest rates at the next Federal Open Market Committee meeting, clouding the outlook for long-term mortgage rates.
[READ: Compare Current Mortgage Rates]
Shutdown Threatens ‘Economic Data Drought’
The Federal Reserve doesn’t set mortgage rates, mortgage lenders set the interest rates they charge. Mortgage rates are influenced by a number of factors, but they generally rise when the economy is strong and fall when the economy is weak.
Importantly, mortgage rates tend to move in the wake of economic data releases on inflation and employment. A shaky jobs report could cause mortgage rates to go down, while a higher-than-expected inflation reading could send mortgage rates upward.
The government shutdown has already caused disruptions in these economic data releases. The September jobs report from the Bureau of Labor Statistics was set to be released on Oct. 3 shortly after the shutdown began but has been delayed with no release date in sight.
“While CPI data is expected to be released before the October FOMC meeting even if the shutdown continues, the prolonged disruption could further complicate the Fed’s decision-making by delaying other key economic reports,” Realtor.com senior economist Jiayi Xu said in a statement.
The shutdown could have an even more tangible effect in markets with a high number of federal workers, many of whom are furloughed or dealing with the threat of layoffs under the Trump administration. Although mortgage rates have been decreasing in recent weeks, Xu notes that consumer sentiment around homebuying nationwide remains flat as housing costs still outpace wage growth.
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Mortgage Rates Drop As Government Shutdown Drags On originally appeared on usnews.com
