The 15-year fixed-rate average fell to 4.21 percent with an average 0.4 point. It was 4.25 percent a week ago and 3.36 percent a year ago. The five-year adjustable-rate average dropped to 4.07 percent with an average 0.3 point. It was 4.12 percent a week ago and 3.36 percent a year ago.
"Mortgage rates ticked lower this week as trade negotiations sparked stock market fluctuations and caused investors to flock to the certainty of Treasuries,” said Danielle Hale, chief economist at Realtor.com. “Looking forward, as markets interpret [Federal Reserve] Chairman [Jerome] Powell's speech last week as an indicator of fewer rate hikes than previously expected, mortgage rates are likely to see less upward pressure to adjust ahead of anticipated hikes.”
However, Hale also pointed out that Friday’s employment report could affect mortgage rates.
“While a low reading on job or wage gains is ordinarily interpreted as bad news for the economy, at this stage in the cycle, a lower reading would suggest that the Fed is relatively closer to neutral and may not need to hike as much as otherwise expected,” Hale said. “A strong reading on jobs or wage gains could lead bond rates, including mortgage rates, to spike higher as investors expect a data-dependent Fed to continue gradual rate hikes."
The yield on the 10-year Treasury dropped below 3 percent this week for the first time in nearly two months, falling to 2.91 percent Tuesday. (Financial markets were closed Wednesday for former president George H.W. Bush’s funeral.) The 10-year yield has dropped 33 basis points in less than a month, as the stock market sell-off has caused investors to put their money in bonds.
Mortgage rates tend to follow the same path as long-term bond yields. A strong economy usually is bad for rates because it raises concerns about inflation. Investors in fixed-income investments such as bonds worry about inflation because it causes their assets to lose value.
“Investors rapidly retreated to safe-haven assets in a move reminiscent of previous global scares over the past three years that have repeatedly held long-term lending rates down even as short-term rates have increased,” said Aaron Terrazas, senior economist at Zillow. “Strong job and wage growth data on Friday could easily erase the downward movement in rates seen over the past week.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than two-thirds of the experts it surveyed say rates will remain relatively stable in the coming week. Michael Becker, branch manager at Sierra Pacific Mortgage, is one who says rates will hold steady.
“Part of the drop in yields and rates is a result of investors covering their shorts as there were massive bets in the markets for rates to go higher," Becker said. “Looking forward, it’s hard to see rates improving more, given how quickly they have dropped.”
Meanwhile, mortgage applications are on the rise, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — rose 2 percent from a week earlier. A week ago, it was purchase applications that drove the increase. This time, it was refinance applications. The refinance index jumped 6 percent from the previous week, while the purchase index edged up 1 percent.
The refinance share of mortgage activity accounted for 40.4 percent of all applications.
“Application activity increased over the week for both purchase and refinance loans, and were 10 percent and 7 percent higher, respectively, than the week before the Thanksgiving holiday,” Joel Kan, an MBA economist, said in a statement. “Additionally, we saw a decrease in the average loan size for purchase applications to the lowest amount since December 2017, [falling to] $298,000 from $313,000. This is perhaps an indication that there are fewer jumbo borrowers, or maybe first-time buyers are having better success reaching the market as we close out the year.”
The MBA also released its mortgage credit availability index (MCAI) this week that showed credit availability increased in November. The MCAI rose 1.1 percent to 188.8 last month. A decline in the MCAI indicates that lending standards are tightening, while an increase signals they are loosening.
“The supply of credit continues to drift higher, driven once again by growth in the conventional credit space, while credit supply in government loans was essentially unchanged from the previous month,” Kan said. “There were more mortgage programs offered with high [loan-to-value] and low credit score characteristics — likely attributable to rising demand from first-time buyers. As seen in our weekly mortgage applications survey, average purchase loan amounts have moved lower in the second half of the year, which also supports first-timers’ increased presence in the market.”
Correction: An earlier version of the story incorrectly listed the 30-year fixed-rate mortgage average at 4.71 percent. It is 4.75 percent.
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