Economists' Outlook

Housing stats and analysis from NAR's research experts.

Instant Reaction: Mortgage Rates, October 28, 2021

Mortgage rates continued to move up amid rising consumer confidence and elevated inflation. According to Freddie Mac, the 30-year fixed mortgage rate inched up to 3.14% from 3.09% the previous week.

Meanwhile, investors wait for the Fed’s next move. The upcoming Fed meeting next week may determine the exact timing of tapering. This means that the Fed may start to gradually reduce the pace of its purchases of long-term Treasuries and mortgage-backed securities as soon as next month. Although the Fed’s policies don’t have a direct impact on mortgage rates, tapering could lead to higher 10-year Treasury yields which move roughly together with mortgage rates.

Looking back, the last time the Fed tapered off was at the end of 2013. Specifically, in December 2013, the Fed began to taper while the asset purchase program ended in October 2014. During this period, mortgage rates increased in the first month, but they moved downwards in the following months. Nevertheless, mortgage rates were already high before the actual 2013 tapering started. The 10-year Treasury yields surged dramatically after the Fed’s first announcement of tapering in May 2013. As a result, the 30-year fixed mortgage rate rose more than 100 basis points (1%) reaching 4.6% in August 2013.

Unlike during the 2013 taper-tantrum, markets reacted differently this time. For instance, since the announcement in September 2021, mortgage rates are 26 basis points (0.26%) higher. Therefore, it seems that what happens after the taper is what is more important. With the Fed raising interest rates by the middle of 2022, expect mortgage rates to move up next year. NAR forecasts the 30-year fixed mortgage rate to reach 3.6% by mid-2022.