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Mortgage Rates Start Q4 Near 2015 Lows


Mortgage rates began the fourth quarter (Q4) near their lowest levels of the year. Mortgage rates in the third quarter were at their highest levels in 2015. Rates are about .375 percent lower than they were in Q3.

This .375-percent spread translates to material savings for home buyers:

  • If you were buying a $300,000 home with 20 percent down now versus in early July, the rate dip would save you $51 per month.
  • If you were buying a $1 million home with 20 percent down now versus in early July, the rate dip would save you $169 per month.

Rate impact of recent economic data and Fed decisions

Rates rise on positive economic expectations and fall on negative economic expectations, this is the reason of the dip recently. The Federal Reserve’s role in rate markets effects if economic data comes in stronger or weaker each month along with jobs growth, inflation, GDP, retail sales and home sales. The Feds have eight rate-policy setting meetings per year and this can cause mortgage rates to fluctuate. In September the rate drop was aided partly by two main factors:

-Continued concerns about non-U.S. economic weakness.

-A dismal U.S. jobs report to end Q3, which promted expectations that the fed may not hike rates in 2015


The outlook

These factors form the basis of the Q4 rate outlook. Last quarter, we noted that rates had risen to start Q3, but that a further rise during Q3 was unlikely due to non-U.S. weakness being generally offset by U.S. strength.

The big unknown at the time was what the Fed would do. Now that the Fed not only held off a rate hike, but also U.S. data has weakened, rates could hold at or slightly above current levels during Q4.

Since the financial crisis, the Federal Reserve isn’t just a rate market regulator; it’s also a market participant. To help the economy in its most dire state, the Fed started investing directly in the bond markets that move rates daily.

As such, the organization is just as “data dependent” as any other market participant, meaning it changes its expectations and market actions based on how U.S. and non-U.S. economic data reports each month.

Because the Fed is now just as reactionary to monthly data releases as the rest of the rate market, we can expect more big rate swings in Q4, especially leading up to and after the Fed’s October 29 and December 16 rate-policy meetings.

But barring any major unforeseen economic events, the current economic tone suggests rates could hold near these current 2015 lows as we move into the final months of the year.

Watch rates daily or weekly

To keep up with rates along the way:


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