30-year home rate falls to 3.51%
Mortgages stay on downward roll
WASHINGTON — U.S. long-term mortgage rates continued to fall this week, breaching already historically low levels and offering an incentive to potential homebuyers.
Mortgage buyer Freddie Mac said Thursday that the average rate for a 30-year fixed-rate mortgage dropped to 3.51% from 3.60% last week. The benchmark rate stood at 4.46% a year ago.
The average rate on a 15-year mortgage declined to 3% from 3.04% last week. It was 3.89% a year ago.
Federal Reserve policymakers continued to hold interest rates low at their latest meeting this week. But the Fed chairman warned that the viral outbreak in China poses a new threat to the strengthening global economy. Although the central bank does not set mortgage rates, its decisions can influence them.
Freddie Mac, the Fed
eral Home Loan Mortgage Corp., surveys lenders nationwide between Monday and Wednesday each week to compile its mortgage rate figures. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates.
The average fee on 30-year fixed-rate mortgages fell to 0.7 point from 0.8 point last week. The average fee for the 15-year mortgage also declined to 0.7 point from 0.8 point.
The average rate for a five-year adjustable-rate mortgage decreased to 3.24% from 3.28% last week. The fee was unchanged at 0.3 point.
Fed Chairman Jerome Powell said Wednesday that the signing of a preliminary U.S.-China trade deal earlier this month, the resolution of Brexit and continuing low interest rates in the U.S. and abroad had suggested that the world economy would start to expand more quickly after being held back by trade conflicts. That scenario is now complicated by the emergence of the deadly virus in China, Powell said at a news conference.
“Mortgage rates fell over the past week, heavily influenced by growing global fears surrounding the ongoing coronavirus outbreak that continued to drive market movements this week,” said Matthew Speakman, a Zillow economist. “While the epidemic’s impact on global commerce remains unclear, markets appear to be erring on the side of pessimism, preparing for slowdowns in growth and, potentially, another cut to the Federal Reserve’s benchmark interest rate.”
The coronavirus outbreak is undoing all the good the December trade deal between Beijing and Washington did. Investors are worried about the damage it will do not only to China’s economy but also the global economy. With companies closing down operations across the country, supplies to U.S. businesses could be delayed.
The bond market has benefited from all this uncertainty. Investors have been buying up bonds, driving down yields. The yield on the 10-year Treasury note tumbled to 1.6% on Wednesday, its lowest level since early October.
“The last few days were about the coronavirus, which, as bad headlines often do, pushed money into bonds from stocks,” said Logan Mohtashami, senior loan officer at AMC Lending Group in Irvine, Calif. “Some of the recent economic data was fine, nothing too dramatic on that front. The Fed isn’t going to move this year, so don’t worry about Fed rate increases. If anything, you’re more likely to see a [rate] cut than a hike. What the bond market is telling you is correct: Even with the stock market doing well, there is no recession coming, but there is no higher rate of growth either — just yet. Watch carefully for any bad headlines from the coronavirus, this can spark an even bigger rally in bonds.”
The Commerce Department released its gross domestic product data on Thursday, which showed the U.S. economy grew 2.3% last year, at a solid but slower pace than in 2018 when it grew 2.9%.
Bankrate.com, which puts out a weekly mortgage rate trend index, found half the experts it surveyed say rates will go down in the coming week. Joel Naroff, president of Naroff Economics, is one who predicts rates will move lower.
“There’s some uncertainty about 2020 setting in,” Naroff said.
Meanwhile, mortgage applications picked up again fueled by lower rates. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — increased 7.2% last week. The refinance index jumped 8%, while the purchase index rose 5%.
The refinance share of mortgage activity accounted for 60.4% of applications.