Mortgage rates fell for the third week in a row, but their downward trend may be short-lived.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average tumbled to 4.1 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.14 percent a week ago and 3.59 percent a year ago. The 30-year fixed rate has fallen 20 basis points in less than a month.
The 15-year fixed-rate average dropped to 3.36 percent with an average 0.5 point. It was 3.39 percent a week ago and 2.88 percent a year ago. The five-year adjustable rate average ticked up to 3.19 percent with an average 0.4 point. It was 3.18 percent a week ago and 2.82 percent a year ago.
“After three straight weeks of declines, the 30-year mortgage rate is now barely above the 2017 low,” Sean Becketti, Freddie Mac chief economist, said in a statement. “Next week’s survey rate may be determined by Friday’s employment report and whether or not it can sustain the strength from earlier this year.”
The yield on the 10-year Treasury sank to 2.34 percent Wednesday, a drop of 28 basis points in less than three weeks. Since mortgage rates tend to follow the moment of long-term bonds, home loan rates also dipped.
But between the release of the Federal Reserve minutes Wednesday and Friday’s employment report, mortgage rates could be poised for a rebound. In the minutes of its March meeting released this week, the central bank indicated that it may begin to shrink its balance sheet. Since the economic downturn, the Fed has been buying mortgage-backed securities and has about $4.5 trillion in bonds. Investors have been wondering when it would begin shedding its holdings.
The last time the Fed signaled it was thinking about unwinding its bond-buying program, mortgage rates soared in what became known as the “taper tantrum.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than half of the experts it surveyed predict rates will remain relatively stable in the coming week, moving less than two basis points up or down. About a third expect rates to go up. Greg McBride, chief financial analyst at Bankrate.com, is one who says they will hold steady.
“We’re due for a more tame jobs report, which coupled with the ongoing uncertainty about whether we’ll see any new policies that could be meaningful to the economy, will keep rates in check,” McBride said.
Meanwhile, mortgage applications were down last week, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — decreased 1.6 percent. The refinance index fell 4 percent, while the purchase index inched up 1 percent.
The refinance share of mortgage activity accounted for 42.6 percent of all applications.
“Markets appeared to hit pause last week as rates held steady on average, with little new information emerging about upcoming administrative or legislative policy changes,” Lynn Fisher, MBA’s vice president of research and economics, said. “Purchase activity crept up slightly on a seasonally adjusted basis, remaining firmly ahead of the pace of applications a year ago. While the average purchase loan size reached a new high for the survey, it has not been increasing as quickly as home prices overall during the last year.”
The MBA also released its mortgage credit availability index (MCAI) this week that showed credit availability increased in March. The MCAI jumped 3.2 percent to 183.4 last month. A decline in the MCAI indicates that lending standards are tightening, while an increase signals they are loosening.
“Credit availability increased in March driven by increased availability of jumbo loan programs and government loan programs,” Fisher said. “Led by a wave of adjustable-rate jumbo offerings, the Jumbo MCAI surged in March, more than offsetting its 4.4 percent decline in February, which was the first tightening of the … component index in 11 months. Increases observed in the Government MCAI were driven by increased availability of FHA’s streamline refinance and 203 K home rehabilitation loan programs.”