Mortgage rates sank to their lowest levels of the year this week but remain well above where they were six months ago.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average dropped to 3.95 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.02 percent a week ago and 3.64 percent a year ago. It is only the second time this year the 30-year fixed rate has dipped below 4 percent.
The 15-year fixed-rate average fell to 3.19 percent with an average 0.5 point. It was 3.27 percent a week ago and 2.89 percent a year ago. The five-year adjustable rate average tumbled to 3.07 percent with an average 0.4 point. It was 3.13 percent a week ago and 2.87 percent a year ago.
Last week’s sharp drop in Treasury yields sent mortgage rates to their lowest levels since mid-November. The yield on the 10-year bond declined to 2.22 percent on May 17, falling 11 basis points in one day. (A basis point is 0.01 percentage point.) It has recovered slightly, but remains well below its peak earlier this month of 2.42 percent. Because the movement of long-term bond yields tends to be one of the best indicators of where mortgage rates are headed, home loan rates also ebbed.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that close to two-thirds of the experts it surveyed say rates will remain relatively stable in the coming week. Almost a third say they will rise. Holden Lewis, assistant managing editor at Bankrate.com, is one who believes rates are headed higher.
“The long-term trend toward higher interest rates will reassert itself,” Lewis said. “The Federal Reserve will continue to raise short-term rates, and in December, it will start shrinking its balance sheet. That will send mortgage rates higher, sooner or later.”
Meanwhile, falling rates drove applications higher last week as homeowners rushed to refinance. According to the latest data from the Mortgage Bankers Association the market composite index — a measure of total loan application volume — increased 4.4 percent. The refinance index jumped 11 percent, while the purchase index slipped 1 percent. The refinance share of mortgage activity accounted for 43.9 percent of all applications.
Despite the recent uptick, loan originations fell sharply in the first quarter, according to Attom Data Solutions. The real estate data company found that refinance originations plummeted to a 10-year low in the first three months of this year, while purchase originations dropped to a three-year low.
“Rising mortgage rates made qualifying for a home purchase more difficult and refinancing an existing home loan less attractive in the first quarter,” Daren Blomquist, senior vice president at Attom Data Solutions, said in a statement. “Despite the sharp drop in purchase originations, there were some encouraging signs in the data that a larger share of first-time homebuyers participated in the housing market in the first quarter: the share of FHA buyers increased from the previous quarter after two consecutive quarters down, and the median down payment decreased following three consecutive quarters of increases. However, the data also indicates more homebuyers needed help to qualify for a home purchase in the first quarter. Nearly 22 percent of all single-family purchase originations had multiple, non-married co-borrowers on the loan, up from 20 percent a year ago.”