Fixed mortgage rates tumbled after falling oil prices and anxiety over a European bank helped drive U.S. Treasury yields to their lowest level in three weeks.
With shares of Deutsche Bank plummeting to record lows this week over concerns about its survival, investors fled to safety, which drove down yields of government bonds not only in Germany but also Switzerland, France, Britain, Sweden and Denmark.
The yield on the benchmark 10-year U.S. Treasury note slipped to 1.56 on Tuesday, its lowest level since Sept. 7. The movement of long-term bonds is one of the best indicators whether mortgage rates will rise or fall. When yields move lower, home loan rates tend to follow.
With the Federal Reserve’s decision to leave its Federal Fund Rate unchanged last week, mortgage rates are expected to remain low. Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than half of the experts it surveyed believe rates will stay where they are in the coming week, moving no more than plus or minus two basis points (a basis point is 0.01 percentage point).
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average sank to 3.42 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 3.85 percent a year ago. The 30-year fixed rate hasn’t been this low since it hit its yearly low of 3.41 percent in early July.
The 15-year fixed-rate average matched its yearly low, sliding to 2.72 percent with an average 0.5 point. It was 2.76 percent a week ago and 3.07 percent a year ago. The last time the 15-year fixed rate was at 2.72 percent was July 14.
The five-year adjustable rate average ticked up to 2.81 percent with an average 0.4 point. It was 2.8 percent a week ago and 2.91 percent a year ago.
“Investors flocked to the safety of government bonds causing the 10-year Treasury yield to continue its descent following the FOMC’s decision to leave rates unchanged,” Sean Becketti, Freddie Mac chief economist, said in a statement. “The course of the economy is uncertain, yet consumers continue to be a bright spot. The September consumer confidence index is up 3 percent to 104.1, exceeding forecasts and reaching a new cycle high.”
Meanwhile, mortgage applications were flat this week, according to the latest data from the Mortgage Bankers Association.
The market composite index — a measure of total loan application volume — dipped 0.7 percent from the previous week. The refinance index decreased 2 percent, while the purchase index increased 1 percent.
The refinance share of mortgage activity accounted for 62.7 percent of all applications.