The 15-year fixed-rate average increased to 3.19 percent with an average 0.7 point. It was 3.14 percent a week ago and 4.07 percent a year ago. The five-year adjustable rate average slipped to 3.36 percent with an average 0.4 point. It was 3.39 percent a week ago and 4.04 percent a year ago.
The better-than-expected jobs report, which came out Friday, reflected renewed strength in the labor market and allayed concerns about a coming recession. Good economic news tends to cause mortgage rates to rise because a strong economy increases fears about inflation. Inflation drives down the value of bonds, causing yields to rise. The yield on the 10-year Treasury rose to 1.85 percent Tuesday before falling back to 1.79 percent Wednesday.
“The November jobs report was another piece of good news for the housing market,” said Joel Kan, a Mortgage Bankers Association economist. “We continue to see growth in the purchase market, supported by steady job gains and slowly increasing housing inventory.”
The Federal Reserve’s decision this week to leave its benchmark rate unchanged had little effect on mortgage rates. The central bank, which lowered the federal funds rate three times in 2019, signaled it would be unlikely to raise it in the coming year.
“In order to move rates up, I would want to see inflation that is persistent and that is significant,” Fed Chair Jerome H. Powell said at a news conference on Wednesday.
Most Wall Street investors and economists are predicting the Fed will hold steady on rates for the next several months. Although the Federal Reserve does not set mortgage rates, its actions can influence them.
“The Fed is leaving interest rates unchanged and that may be the case for much or all of 2020,” said Greg McBride, chief financial analyst at Bankrate.com. “Same old, same old means there’s no impetus for big moves in mortgage rates currently.”
The U.S.-China trade talks have had more of an influence on mortgage rates lately than any economic data such as the employment report or Federal Reserve decision. Since the two countries started imposing tariffs on each other in 2018, the progress or lack of progress in their discussions has caused volatility in the financial markets. Tariffs on $160 billion in Chinese goods are set to go into effect on Sunday, unless a deal is reached.
“If no deal is made and tariffs increase, we would likely see a big rally in bonds and [mortgage] rates dropping,” said Michael Becker, a retail branch manager at Sierra Pacific Mortgage in Lutherville, Md. “I think this outcome is unlikely and that some type of deal will be announced or at least the tariffs increases will be delayed.”
“We’re playing riverboat gambler with the December 15th tariffs with China,” said Logan Mohtashami, senior loan officer at AMC Lending Group in Irvine, Calif. “Whatever happens this weekend, know that winter 2020 is coming soon, which is the election. The president can only play this tariff man game so much, so don’t assume everything is going to create a recession, relax.”
Meanwhile, refinances helped mortgage applications rebound. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — increased 3.8 percent from a week earlier. The refinance index rose 9 percent, while the purchase index slipped 0.4 percent.
The refinance share of mortgage activity accounted for 62.4 percent of applications.
“Low mortgage rates continue to encourage borrowers to act, with last week’s 3.8 percent increase in mortgage applications primarily the result of a 9 percent jump in refinances,” said Bob Broeksmit, MBA president and CEO. “Purchase applications decreased slightly last week, but were up 5 percent from a year ago, when rates were much higher. Current low rates, along with a very healthy labor market, point to a strong finish in 2019 for the mortgage market.”