The 15-year fixed-rate average dropped to 3.15 percent with an average 0.5 point. It was 3.2 percent a week ago and 4.24 percent a year ago. The five-year adjustable rate average slumped to 3.39 percent with an average 0.4 point. It was 3.44 percent a week ago and 4.09 percent a year ago.
“Once again, it was the ongoing saga of U.S.-China trade talks that drove most of the market’s movements,” said Matthew Speakman, a Zillow economist. “Despite growing optimism and the tentative agreement of an initial deal, the talks failed to yield meaningful developments in recent weeks. Ambiguities regarding the tentative deal’s details have thrown a wrench into the proceedings and reinjected doubts among investors, driving them to safer assets and nudging mortgage rates down.”
Uneasiness over the trade discussions as well as the protests in Hong Kong drove down yields on U.S. Treasurys. After flirting with 2 percent earlier this month, the yield on the 10-year bond fell back to 1.73 percent on Wednesday, exactly where it started the month. Because mortgage rates tend to follow the same path as long-term bonds, they also drifted down.
“It’s likely that market movements will be modest heading into the Thanksgiving holiday, but the possibility of trade-related developments will keep investors on their toes,” Speakman said. “What’s more, rates are likely to respond to key readings on manufacturing and consumer spending, both due in the next seven days.”
The Federal Reserve released the minutes from its October meeting this week. The central bank cut its benchmark rate three times this year, including last month, but officials signaled they aren’t planning any more reductions unless economic conditions change significantly. The Fed doesn’t set mortgage rates, but its decisions influence them.
Nearly half of the experts surveyed by Bankrate.com, which puts out a weekly mortgage rate trend index, say rates will move lower in the coming week. Mitch Ohlbaum, loan officer at Macoy Capital Partners in Los Angeles, is one who predicts rates will go down.
“Housing starts rebounded in October after slumping in September with multifamily leading the segment with a surge of 8.6 percent,” Ohlbaum said. “Building permits climbed 5 percent to the highest level in 12 years, which is a significant signal about confidence. Still in the balance is the U.S.-China trade talks, which would, of course, have an impact on rates. Overall, we do not have any negative economic news [and that is] signaling a strong economy as we head into the last 45 days of 2019.”
Meanwhile, mortgage applications dwindled after rates moved higher a week ago. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — decreased 2.2 percent from a week earlier. The refinance index dropped 8 percent, while the purchase index rose 7 percent.
The refinance share of mortgage activity accounted for 59.5 percent of all applications.
“Mortgage applications decreased 2.2 percent last week, as a strong jump in purchase activity was not enough to overcome a decline in refinances,” said Bob Broeksmit, MBA president and chief executive. “With mortgage rates hovering below 4 percent, refinances still make up over half of application activity. As the calendar turns to 2020, the pool of eligible refinance borrowers will shrink, but the purchase market is poised to pick up some of the expected decline in volume. Purchase applications were up 7 percent from a year ago, continuing the trend seen throughout this year.”