The 15-year fixed-rate average increased to 3.19 percent with an average 0.6 point. It was 3.18 percent a week ago and 4.23 percent a year ago. The five-year adjustable rate average ticked up to 3.43 percent with an average 0.4 point. It was 3.35 percent a week ago and 4.04 percent a year ago.
“Even with a substantial dose of economic data and news over the past seven days, geopolitical developments once again had the greatest impact on rates,” said Matthew Speakman, a Zillow economist. “Easing concerns surrounding Brexit and the U.S.-China trade tensions, the two major geopolitical stories of the past year, pushed mortgage rates higher on Monday. But this upward momentum will likely be curtailed after the Federal Reserve announced a third cut to the federal funds rate this year.”
On Wednesday, the Federal Reserve lowered its benchmark rate by a quarter of a percentage point to a range of 1.5 percent to 1.75 percent. The move, widely expected by the financial markets, came too late in the week to be factored into Freddie Mac’s survey. The federally chartered mortgage investor aggregates rates weekly from 125 lenders from across the country to come up with national average mortgage rates.
The Fed doesn’t set mortgage rates, but its decisions influence them. In cutting the federal funds rate, even though unemployment is low and the economy continues to grow, albeit slowly, the central bank is trying to shield the economy from the effects of ongoing trade tensions, Brexit uncertainty and global economic weakness.
Mortgage rates tend to respond more to the movement of the 10-year Treasury. After the yield on the 10-year bond peaked at 1.85 percent for the month on Monday, it retreated to 1.78 percent on Wednesday after the Fed’s announcement. The pullback could signal lower mortgage rates are coming, depending on upcoming economic data releases.
“The decline in the Fed’s short-term rates is not likely to result in noticeable drops in mortgage rates, as bond investors look for the soon-to-be-released third quarter estimate of gross domestic product,” said George Ratiu, senior economist at Realtor.com. “Low mortgage rates are expected to remain on an increasingly cloudy horizon.”
“Like a ping-pong match where the ball does not travel very far yet clears the same net over and over, mortgage rates have bounced above and below the same net or technical line for the last two weeks, yet bonds have ended up right where they started,” said Derek Egeberg, certified mortgage planning specialist at Academy Mortgage in Yuma, Ariz. “Look for rates to remain on this same table until more significant economic news becomes available.”
Meanwhile, mortgage applications were flat last week. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — increased 0.6 percent from a week earlier. The refinance index fell 1 percent, while the purchase index ticked up 2 percent.
The refinance share of mortgage activity accounted for 58 percent of all applications.
“Mortgage applications rose 0.6 percent last week, as a 2 percent gain in purchase activity offset a slight decline in refinances,” said Bob Broeksmit, MBA president and chief executive. “With mortgage rates much lower than they were last fall, purchase applications were up a strong 10 percent from a year ago.”