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.”
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