As markets grapple with ongoing economic obstacles and uncertainty, the mortgage market has found itself stuck.
The 30-year, fixed-rate mortgage averaged 6.66% in the week ended Thursday, according to mortgage giant Freddie Mac. It's barely up from last week's average of 6.65% — but it's higher than it was at the same time a year ago.
Similarly, the 15-year, fixed-rate mortgage increased slightly to 5.98%. That's up from the previous week and the same time last year.
Daily mortgage rates, typically more volatile than weekly averages, were also moving in the same sort of sideways direction.
As of Wednesday afternoon, the 30-year, fixed-rate mortgage had edged up one basis point from the previous day to 6.75%, according to Mortgage News Daily. The 15-year, fixed-rate mortgage also rose one basis point to 6.32%.
Market stagnating
After a summer defined by volatility in the mortgage market, August has been a comparatively quiet month. The average 30-year, fixed-rate mortgage has stayed within a narrow 3-basis-point range since July 30.
On the one hand, it's a welcome reprieve for buyers and lenders who were struggling with the almost whiplash nature of the market earlier this summer. But on the other hand, it's a sign of just how messy the market is — and how many headwinds it's contending with.
For one, there's the war in Iran, which continues to sow uncertainty and put pressure on oil prices. That's created a sort of ripple effect through the economy that's sent mortgage rates higher.
There's also the Federal Reserve. While the central bank doesn't set mortgage rates directly, its policy has far-reaching implications that can disrupt long-term borrowing, including home loans. This summer, the Fed got new leadership, raising questions about how policy might change. More than that, the bank has signaled that it sees interest rates staying higher for longer — an idea that's led long-term lenders to raise their premiums, including for mortgage borrowers.
On top of that, the U.S. Treasury recently increased its purchases of government bonds after long-term interest rates climbed to their highest levels in years. That's intended to help keep borrowing costs, including mortgage rates, from rising even further.
Taken together, it paints a complicated picture, and for now, the mortgage market is sort of paralyzed as it waits for more information.
Matthew Graham, chief operating officer at Mortgage News Daily, said the bond market might offer a better preview of what's to come for mortgages.
"At times like this, if you're just looking for a general sense of how the rate landscape is evolving, it can be more useful to simply track underlying bond market trends," he wrote in a Wednesday blog post. "A 10-year or 5-year Treasury yield is a good approximation of mortgage bond movement."
Bright spots
Even as the market is hamstrung, there is some evidence that buyers could be gaining more leverage elsewhere in the housing market.
Exclusive Homes.com data showed that in July, home prices rose 2.6% despite strong inventory growth and obstacles in the mortgage market. Brad Case, chief residential economist for Homes.com, says it's indicative of a larger shift.
"Mortgage rates rose substantially between late February and late July, but the mortgage 'lock-in effect' appears to be easing, and more owners have been willing to put their homes on the market," Case said in a statement. "Buyers, too, showed a greater willingness to transact at higher mortgage rates.”
More than that, Jeff DerGurahian, head economist at lender loanDepot, suggested that the increase in for-sale supply has created more buyer's markets across the country.
"That may give buyers more room to negotiate and look beyond the sticker price," DerGurahian said in a statement. "While sellers may not be willing to move on price, they could be open to concessions that reduce other costs. Builders may be especially willing to offer mortgage rate buydowns as they look to move available homes ... These offers often take the form of permanent buydowns, with the builder contributing enough to reduce the mortgage rate for the life of the loan."
In other words, if buyers and sellers continue to grow comfortable with elevated borrowing costs, it could mean a busier fall housing market.
"It truly is a surprisingly strong market," Case added in an email to Homes.com News, "and it seems to be extending the normal peak of the homebuying season."
This story was originally reported by Moira Ritter for Homes.com News.