17 November 2018

Mortgage Rates Move Lower Again

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It seems to happen every time the Federal Reserve raises short-term interest rates. The expectation is that mortgage rates will also rise.

But one week after the central bank’s rate increase, home loan rates went down.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average fell to 4.57 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.62 percent a week ago and 3.90 percent a year ago.

The 15-year fixed-rate average dropped to 4.04 percent with an average 0.4 point. It was 4.07 percent a week ago and 3.17 percent a year ago. The five-year adjustable rate average held steady at 3.83 percent with an average 0.3 point, same as it was a week ago. It was 3.14 percent a year ago. 

Mortgage rates are influenced largely by the expectations of investors, not the moves of the Federal Reserve. Home loan rates slumped this week because of rising concerns about tariffs on Chinese goods.

 “Mortgage rates fell by about 10 basis points last week despite an interest rate hike from the Federal Reserve,” said Aaron Terrazas, senior economist at Zillow. “Markets had largely priced in the Fed move and comments from European Central Bank officials late last week — along with escalating trade tensions between the United States and China — all contributed to a heightened risk environment. International trade is likely to continue dominating headlines in the near term, and comments by several Fed officials over the next week could provide clarity on how key [Federal Open Market Committee] officials view the longer-term U.S. economic outlook.”

Bankrate.com, which puts out a weekly mortgage rate trend index, found no consensus on where rates are headed among the experts it surveyed. About a third said they will rise, another third said they will fall and the rest said they will remain relatively stable in the coming week. Michael Becker, branch manager of Sierra Pacific Mortgage, is one who expects rates to move lower.

 “While the longer-term trend is still about rising mortgage rates, I think we could see a small dip in mortgage rates in the coming week,” Becker said. “President Trump seems to be upping the rhetoric in regards to trade tariffs, and this should cause some concern about global growth. Add in concerns about Angela Merkel’s ability to remain in power in Germany and you have the makings of a small dip in rates in the coming week.”

Meanwhile, the decline in rates fueled a jump in mortgage applications, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — increased 5.1 percent from a week earlier. The refinance index rose 6 percent, while the purchase index grew 4 percent.

The refinance share of mortgage activity accounted for 36.8 percent of all applications.

“It was a mixed week for rates in MBA’s survey,” said Joel Kan, an MBA economist. “Treasury yields finished the week slightly higher as a hawkish statement from the FOMC, and market jitters caused by trade concerns and other geopolitical uncertainty offset each other. We did see an increase in mortgage application activity, driven on both the purchase and refi side by an increase in conventional applications. Conventional purchase applications rose 6 percent week over week in our survey.”

Click here for the original article from The Washington Post.

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