After more than a month of declines, mortgage rates paused their descent ahead of next week’s Federal Reserve meeting.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average was unchanged at 3.82 percent with an average 0.6 point. (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 4.62 percent a year ago.
The 15-year fixed-rate average dipped to 3.26 percent with an average 0.5 point. It was 3.28 percent a week ago and 4.07 percent a year ago. The five-year adjustable rate average slipped to 3.51 percent with an average 0.4 point. It was 3.52 percent a week ago and 3.83 percent a year ago.
“Mortgage rates were flat this week, remaining near their lowest levels in more than a year as some uncertainty surrounding trade tensions appeared to ease,” said Matthew Speakman, a Zillow economist. “But the near-zero net change does not do justice to the bumpy ride rates took over the past seven days. Friday’s underwhelming jobs report sent rates skidding lower, continuing their weeks-long downward trajectory towards long-term lows. But Monday’s news that tariffs on goods imported from Mexico would not go through as planned nudged bond yields back upwards and mortgage rates followed suit, a trend that continued through Tuesday.”
The yield on the 10-year Treasury, which started the month at 2.07 percent, rose to 2.15 percent on Monday but pulled back to 2.13 percent on Tuesday. Mortgage rates are closely tied to the movement of long-term bond yields.
“Bond markets remain attuned to the fact that mounting risks to the global economic outlook — specifically the enduring trade tensions between China and the U.S., Brexit and low expectations for the pace of inflation — may motivate the Federal Reserve to cut the federal funds rate at least once this calendar year,” Speakman said. “As a result, it’s unlikely that major rate movements will occur ahead of next week’s [Federal Open Market Committee] meeting, though Friday’s retail sales data release could move the market if it shows some surprising results.”
Shashank Shekhar, CEO of Arcus Lending in San Jose, predicts rates will continue to fall.
“With lower inflation numbers and even talk about Fed cutting rates later this year, mortgage bonds will continue to get a boost,” he said. “Expect the rates to trend lower this week, albeit not significantly.”
But Elizabeth Rose, a certified mortgage planning specialist at AmCap Home Loans in Plano, Tex., expects rates to hold steady.
“Trade talks continue to influence the markets,” Rose said. “In addition, inflation continues to remain tame, which is good for mortgage rates. However, this recent rally has slowed and could come to an end soon. Mortgage bonds are in a range that could keep mortgage rates relatively unchanged for the coming week.”
LendingTree’s recent mortgage comparison shopping report found that nearly 54 percent of purchase borrowers received a mortgage rate less than 4.25 percent.
Meanwhile, low rates fueled a spike in mortgage applications. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — increased 26.8 percent from a week earlier. The refinance index shot up 47 percent from the previous week to its highest level since 2016. The purchase index jumped 10 percent.
The refinance share of mortgage activity accounted for 49.8 percent of all applications.
“Mortgage applications surged last week, with refinance and purchase activity both showing impressive weekly and year-over-year gains,” said Bob Broeksmit, MBA president and CEO. “Rates are now considerably lower than they were a year ago and are increasing the purchasing power for this summer’s prospective homebuyers. This is good news, considering that low supply levels — especially for first-time buyers — are still putting upward pressure on home prices and overall affordability.”
The MBA also released its mortgage credit availability index (MCAI) this week that showed credit availability increased in May. The MCAI rose 1.9 percent to 189.5 last month. An increase in the MCAI indicates that lending standards are loosening, while a decrease signals they are tightening.
“Credit supply increased 2 percent in May, driven by the fifth straight gain in the jumbo index, which was up 7 percent and surpassed last month as the new all-time survey high,” Joel Kan, an MBA economist, said in a statement. “The conventional index continues to grow, while the government index has generally been lower this year. Government credit supply continues to decline since peaking in 2017, as there are fewer streamlined refinance programs being offered.”
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