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complex interplay of factors is driving mortgage rate volatility, making it challenging to predict their direction - but rates are likely to decline further this year. Housing Market Decoded provides context for market data, helping you make sense of the numbers.

    In theory, lower mortgage rates should boost both buyers and sellers in the housing market this fall. However, movements in rates have not followed expectations. Although rates may drop in the fourth quarter, there will be weekly volatility, potentially leading to a bumpy ride through year-end.

    The average 30-year fixed-rate mortgage rate fell to its lowest level in history at 2.73% in January 2021, but subsequently rose faster than any other time in four decades as the Fed hiked short-term interest rates to combat inflation. Over the past two years, rates have ranged between 6 and 7.79%. However, the relationship between mortgage rates and federal funds rate has become less clear.

    Mortgage rates had begun falling in July, anticipating a Fed rate cut, but instead of dropping after the September meeting, they increased by nearly a quarter point. The Labor market, inflation, and mortgage demand are among the factors influencing mortgage rates, with some having opposing effects, leading to weekly volatility.

    The strong labor market has led to higher mortgage rates as investors shift from safe assets to investments with higher returns. Lower inflation, however, tends to lead to lower mortgage rates. Mortgage demand can also impact rates, with prices dropping when demand is low and increasing when demand rises. Despite expected declines in mortgage rates this fall, forecasts indicate they will remain above 6% through year-end.

    Dr. Lisa Sturtevant, Chief Economist at Bright MLS, notes that continued strong job growth, a turnaround in inflation, or increased mortgage demand could alter the mortgage rate trajectory.