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Mortgage rates break a rising trend and edge lower — as Biden administration pushes $1.9-trillion stimulus

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Mortgage rates dipped slightly over the past week,
underscoring the uncertainty surrounding the pandemic and the federal government’s
economic response.

The 30-year fixed-rate mortgage averaged 2.77% for the week ending Jan. 21, down two basis points from the week prior, Freddie Mac
FMCC,
-1.62%
 reported Thursday.

The 15-year fixed-rate mortgage also fell two basis points
to an average of 2.21%, while the 5-year Treasury-indexed hybrid
adjustable-rate mortgage fell by 32 basis points to 2.8%.

In falling this week, mortgage rates broke out of a trend that saw them rising so far in 2021. “That upward momentum has since dissipated, and it appears that fears of an extended, more substantial spike in rates have diminished – at least for now,” said Matthew Speakman, an economist with Zillow
ZG,
+0.34%.

But mortgage rates
are unlikely to continue dropping to record lows like they did throughout 2020.
The pandemic remains a concern among investors, but the rollout of the vaccine
should begin to improve matters. That said, uncertainty regarding the
trajectory of the Biden administration’s proposed stimulus plan should keep rates
in check, Speakman noted.

Rising rates would seriously constrain buyers’ purchasing power, given how high home prices are today. But higher mortgage rates do have a silver lining.

“Slightly higher rates will translate into a higher monthly mortgage payment for today’s home buyers compared to December’s buyers, but context is important,” said Danielle Hale, chief economist at Realtor.com. “Higher rates signal an improved economic outlook which will ultimately be good for home buyers and home values.”

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