This past week, the yields on long-term bonds plummeted to historic lows, reflecting investors’ anxiety about the global economy. The 10-year Treasury dived to its all-time low Tuesday, dropping to 1.37 percent. It was 2.25 percent in January.
U.S. bond yields weren’t the only ones taking a hit. Yields on 10-year government bonds in Germany, the United Kingdom and Japan also sank to record lows.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than half of the experts it surveyed think rates will continue to fall in the coming week. If Friday’s employment report disappoints, home loan rates could slide into record territory.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average plunged to 3.41 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.48 percent a week ago and 4.04 percent a year ago. The 30-year fixed rate has now dropped more than 50 basis points since the beginning of the year. (A basis point is 0.01 percentage point.) It has fallen 25 basis points in the past month alone.
The 15-year fixed-rate average tumbled to 2.74 percent with an average 0.4 point. It was 2.78 percent a week ago and 3.20 percent a year ago.
The five-year adjustable rate average dropped to 2.68 percent with an average 0.5 point. It was 2.70 percent a week ago and 2.93 percent a year ago.
“Continuing fallout from the Brexit vote drove Treasury yields lower again this week,” Sean Becketti, Freddie Mac chief economist, said in a statement. “The 30-year fixed-rate mortgage followed Treasury yields, falling 7 basis points to 3.41 percent in this week’s survey. Mortgage rates have now dropped 15 basis points over the past two weeks, leaving them only 10 basis points above the all-time low.”
Fueled by a boom in refinances, mortgage applications spiked this week, according to the latest data from the Mortgage Bankers Association.
The market composite index — a measure of total loan application volume – jumped 14.2 percent from the previous week. The refinance index surged 21 percent, while the purchase index grew 4 percent.
The refinance share of mortgage activity accounted for 61.6 percent of all applications, its highest level in five months.
“When rates drop, homeowners know to call their lender and see whether they could benefit from a refinance,” said Mike Fratantoni, MBA’s chief economist. “Lenders are going to be busy fielding those inbound calls. Mortgage rates have been low for years, but the impact of Brexit has brought us close to record lows once again, with jumbo rates already at their lowest levels. In addition to the increase in refinance activity, lower rates also seem to be helping potential homebuyers jump into the market. Even though financial market volatility may be causing some anxiety, the combination of low rates and a still strong job market in the U.S. outweighs those fears for these homebuyers.”