Mortgage rates fell to three-month lows and are expected to remain there in the near term.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average fell to 3.6 percent with an average 0.8 points. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 3.65 percent a week ago and 4.45 percent a year ago. The 30-year fixed rate hasn’t been this low since October.
The 15-year fixed-rate average dropped to 3.04 percent with an average 0.8 points. It was 3.09 percent a week ago and 3.88 percent a year ago. The five-year adjustable-rate average sank to 3.28 percent with an average 0.3 points. It was 3.39 percent a week ago and 3.9 percent a year ago.
“Perhaps surprisingly, major geopolitical developments over the past month — stories that dictated most of mortgage rates’ movements through 2019 — have failed to let rates loose in any meaningful way,” said Matthew Speakman, a Zillow economist. “Inflation is running below target and the Federal Reserve appears unlikely to raise the federal funds rate in the near future, so upward pressure on mortgage rates is limited for the time being. With a shortage of market-moving data on tap, and barring a monumental development on the trade front, this minimal upward pressure on rates is unlikely to strengthen in the coming days.”
Low mortgage rates are tempting home buyers off the sidelines and into the market. New data shows that buyers didn’t wait until the new year to find their new home and instead were out in unexpected force last month. Existing-home sales grew 3.6 percent in December, its best pace in nearly two years, according to the National Association of Realtors . The Federal Reserve meets next week but isn’t expected to change its benchmark rate.
“Mortgage rates over the last month have been remarkably stable,” said Michael Becker, branch manager at Sierra Pacific Mortgage in Lutherville, Md. “Economic reports don’t seem to move bond markets lately. For example, [Wednesday’s] strong existing-home sales report had no reaction in the bond market, when normally a good report like this would have pushed rates higher. The good news is that rates are holding at three-month lows and very close to last year’s best levels. I’m not sure what it will take to break this flat pattern, but someday there will be a breakout to higher or lower levels. For now, I expect more of the same and for rates to hold steady in the coming week.”
The optimism that has fueled the stock market to record highs lately hasn’t damped investors’ enthusiasm for bonds. The yield on the 10-year Treasury dipped to 1.77 percent on Wednesday. Typically bond prices fall and yields rise when the Dow Jones industrial average soars. The pressures that are keeping bond yields low are also holding down mortgage rates.
“Even though the stock market is at all-time highs, the bond market doesn’t believe in the higher rate of the growth story,” said Logan Mohtashami, senior loan officer at AMC Lending Group in Irvine, Calif. “We also have cautionary headlines such as Boeing delays and now the coronavirus, to which some people believe this might hinder some growth. … The market believes the Fed is really out of the picture while growth is stalling. The bond market will get ahead of any Fed action in the future so, for now, Fed meetings don’t have the same importance as they did last year.”
Meanwhile, mortgage applications retreated after their big jump to start the year. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — decreased 1.2 percent last week. Both the refinance index and purchase index fell 2 percent.
The refinance share of mortgage activity accounted for 61.6 percent of applications.
“Although mortgage applications pulled back slightly last week, the year-over-year comparison points to a solid start for the mortgage market in early 2020,” said Bob Broeksmit, MBA president and CEO. “Refinances were up an impressive 116 percent from a year ago, while purchase activity increased 8 percent. With rates forecasted to stay below 4 percent in the near future, applications should remain at this elevated level.”
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