Here we are with August relegated to posterity and we have been proven right. We said at the beginning of August that mortgage rates wouldn’t move much for the month, and that has been the case. For the most part, rates held within a tight range. We didn’t see much variance from 3.375%-to-3.5% for the conventional 30-year loan.

Now, the question is, will this range hold for another month?    

Tough to call, but it appears less likely. Sentiment is in a flux. More credit-market watchers anticipate an increase in the federal funds rate, and they anticipate it could happen at the next Fed meeting on September 21. Traders in federal funds rate futures contracts are betting a 27% chance of a rate increase in three weeks. A month ago, the odds were low-single digits. Looking further afield, these same traders are betting a 56% chance interests will be raised at the December meeting, if not before.

Mortgage rates have been staid for the past month, and so has the yield on the 10-year U.S. Treasury note. This is no surprise; long-term mortgage rates tend to follow the yield on the 10-year note.

That said, two other indicators don’t rule out a rate increase this month.

Gold prices have fallen over 3% in the past two weeks. Gold tends to move inversely to interest-rate expectations – the higher the interest-rate expectations, the lower the gold price. Over the same period, the U.S. dollar has appreciated against most of the world’s currency.  The dollar would gain in value against another currency if U.S. interest rates are expected to rise because foreign investors would demand more dollars to invest in U.S.-denominated securities (which would offer higher yields).

The outlook for interest rates is a bit more uncertain, but we’ll stick to our guns, nonetheless: No Fed interest rate increase before December. But that doesn’t mean we couldn’t see rising market interest rates, or more rate volatility, between now and then.  

Information provided by Jessica Regan.

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