Your 401(k) might not be doing so great these days, but for those looking to buy or refinance a home, the stock market’s fluctuations have been a holiday gift. Investors’ anxiety is pushing mortgage rates lower.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average tumbled to 4.63 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.75 percent a week ago and 3.93 percent a year ago.
The 15-year fixed-rate average sank to 4.07 percent with an average 0.5 point. It was 4.21 percent a week ago and 3.36 percent a year ago. The five-year adjustable rate average slipped to 4.04 percent with an average 0.3 point. It was 4.07 percent a week ago and 3.36 percent a year ago.
Mortgage rates haven’t risen in more than a month as the financial markets have been racked by concerns over U.S.-China trade relations, Brexit and slower economic growth. Investors have been moving their money into safer assets such as bonds, causing yields to fall. The yield on the 10-year Treasury declined to 2.85 percent Friday, a drop of close to 40 basis points in one month. (A basis point is 0.01 percentage point.) Because mortgage rates tend to follow the same path as long-term bonds, they also fell.
But this recent decline may be over. The 10-year yield has started to head back up, climbing to 2.91 percent on Wednesday.
“Although we don’t see it this week’s data, momentum has started to shift and rates are likely lining up to resume their upward climb,” said Danielle Hale, chief economist for Realtor.com. “A variety of economic indicators are coming in at good-but-not-great levels, from inflation, to job gains, to wage gains. At this point in the economic cycle, that's exactly what we want to see.”
Next week’s much-anticipated meeting of the Federal Reserve’s Open Market Committee will shape expectations for the week ahead, says Aaron Terrazas, senior economist at Zillow.
“Markets expect another rate hike in December, but the committee’s forward guidance will be more important for long-term rates,” Terrazas said.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that almost half of the experts it surveyed say rates will rise in the coming week. Jim Sahnger, a mortgage planner at C2 Financial, disagrees. He predicts rates will hold steady.
“Volatility is the norm today,” Sahnger said. “The reasons range from continued strife about trade, Brexit, inflation to the Fed, just to name a few. This month’s data on inflation was tame with both PPI and CPI within expectations. Eyes turn to the Fed meeting next week where Fed funds [rate] is expected to be kicked up .25 percent and then to Europe with Brexit talks and China as trade discussions continue. All this should be just enough to keep rates in check, for the week anyway.”
Meanwhile, falling rates are lifting mortgage applications, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — increased 1.6 percent from a week earlier. The refinance index grew 2 percent from the previous week, while the purchase index rose 3 percent.
The refinance share of mortgage activity accounted for 41.5 percent of all applications.
“The underlying demand for buying a home remains robust as 2018 comes to a close,” said Bob Broeksmit, MBA president and chief executive. “Despite ongoing affordability challenges, purchase applications were up again over both the previous week and a year ago. As long as inventory levels hold up, purchase activity should remain relatively strong through the rest of the year.”
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