Consumers are losing confidence in the economy, and that’s helping drive down mortgage rates.
The Conference Board reported earlier this week that its consumer-confidence index sank to a seven-month low. The pessimistic outlook has caused investors to look for a safe place to park their money. Many of them have turned to bonds, sending yields lower. The yield on a 10-year Treasury note fell to 1.65 percent at one point on Wednesday before rebounding.
Since mortgage rates are closely tied to the movement of long-term bonds, interest rates on home loans continue to tumble.
According to the latest data released Thursday by the Federal Home Loan Mortgage Corp., the 30-year fixed-rate average dropped to 3.62 percent with an average 0.6 point, its lowest level in more than a year. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.65 percent a week ago and 3.8 percent a year ago. The 30-year fixed rate has not risen in seven weeks and has not been this low since early February 2015.
The 15-year fixed-rate average slipped to 2.93 percent with an average 0.5 point, its third straight week below 3 percent. It was 2.95 percent a week ago and 3.07 percent a year ago.
The five-year adjustable-rate average fell to 2.79 percent with an average 0.5 point. It was 2.85 percent a week ago and 2.99 percent a year ago.
“Yields on the 10-year Treasury continued their downward trend this week after a small rally the previous two weeks,” Sean Becketti, Freddie Mac chief economist, said in a statement.
“The 30-year mortgage responded, falling 3 basis points to 3.62 percent. [A basis point is 0.01 percentage point.] Since the beginning of 2016, 30-year rates have fallen almost 40 basis points helping housing markets sustain their momentum into this year. Earlier this week, the National Association of Realtors announced existing home-sales were up 4 percent month over month in January and up 11 percent from last year.”
Meanwhile, mortgage applications were down, according to the latest data from the Mortgage Bankers Association.
The market composite index — a measure of total loan-application volume — fell 4.3 percent from the previous week. The refinance index tumbled 8 percent, while the purchase index rose 2 percent.
The refinance share of mortgage activity accounted for 61 percent of all applications.