Mortgage rates move higher for third week in a row
Mortgage rates continued to climb this week but could be headed lower.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average moved higher for the third week in a row, rising to 3.78% with an average 0.5 point. (Points are fees paid to a lender equal to 1% of the loan amount and are in addition to the interest rate.) It was 3.75% a week ago and 4.83% a year ago.
The 15-year fixed-rate average increased to 3.19% with an average 0.6 point. It was 3.18% a week ago and 4.23% a year ago. The five-year adjustable rate average ticked up to 3.43% with an average 0.4 point. It was 3.4% a week ago and 4.04% a year ago.
"Even with a substantial dose of economic data and news over the past seven days, geopolitical developments once again had the greatest impact on rates," said Matthew Speakman, a Zil l ow economist. "Easing concerns surrounding Brexit and the U.S .- China trade tensions, the two major geopolitical stories of the past year, pushed mortgage rates higher on Monday. But this upward momentum will likely be curtailed after the Federal Reserve announced a third cut to the federal funds rate this year."
On Wednesday, the Federal Reserve lowered its benchmark rate by a quarter of a percentage point to a range of 1.5% to 1.75%. The move, widely expected by the financial markets, came too late in the week to be factored into Freddie Mac's survey. The federally chartered mortgage investor aggregates rates weekly from 125 lenders from across the country to come up with national average mortgage rates.
The Fed doesn't set mortgage
rates, but its decisions influence them. In cutting the federal funds rate, even though unemployment is low and the economy continues to grow, albeit slowly, the central bank is trying to shield the economy from the effects of ongoing trade tensions, Brexit uncertainty and global economic weakness.
Mortgage rates tend to respond more to the movement of the 10-year Treasury. After the yield on the 10-year bond peaked at 1.85 percent for the month on Monday, it retreated to 1.78% on Wednesday after the Fed's announcement. The pullback could signal lower
mortgage rates are coming, depending on upcoming economic data releases.
"The decline in the Fed's short-term rates is not likely to result in noticeable drops in mortgage rates, as bond investors look for the soonto-be-released third quarter estimate of gross domestic product," said George Ratiu, senior economist at Realtor. com. "Low mortgage rates are expected to remain on an increasingly cloudy horizon."
Bankrate.com, which puts out a weekly mortgage rate trend index, found that half of the experts it surveyed say rates will hold steady in the coming week.
"Like a ping- pong match where the ball does not travel very far yet clears the same net over and over, mortgage rates have bounced above and below t he same net or technical line for the last two weeks, yet bonds have ended up right where they started," said Derek Egeberg, certified mortgage planning specialist at Academy Mortgage in Yuma, Ariz. "Look for rates to remain on this same table until more significant economic news becomes available."
Meanwhile, mortgage applications were flat last week. According to the latest data from the Mortgage Bankers
Association, the market composite index — a measure of total loan application volume — increased 0.6% from a week earlier. The refinance index fell 1%, while the purchase index ticked up 2%.
The refinance share of mortgage activity accounted for 58%of all applications.
"Mortgage applications rose 0.6% last week, as a 2% gain in purchase activity offset a slight decline in refinances," said Bob Broeksmit, MBA president and CEO. "With mortgage rates much lower than they were last fall, purchase applications were up a strong 10% from a year ago."