Freddie Mac, the federally chartered mortgage investor, aggregates rates from about 80 lenders across the country to arrive at weekly national averages. The survey is based on mortgages on the purchase of a home. Refinance rates may be different. It uses rates for high quality borrowers with strong credit scores and large down payments. Due to criteria, these rates are not available to all borrowers.
The average of fixed rates over 15 years slipped to 4.31% with an average of 0.8 points. It was 4.43% a week ago and 2.27% a year ago. The average of the adjustable rates over five years amounted to 4.2% with an average of 0.3 points. It was 4.08% a week ago and 2.59% a year ago.
“Freddie Mac’s fixed rate for a 30-year mortgage fell for the second week in a row, following Tuesday morning’s sharp drop in the 10-year Treasury,” wrote Joel Berner, senior economic research analyst at Realtor.com, in an email. . Yields quickly fell 14 basis points from the day’s open and have hovered around 2.75% since. Investors who participated in the stock market sell-off of the past five weeks turned their attention back to the debt market, pushing up the prices of Treasuries and mortgage-backed securities. This allowed mortgage rates to fall, even amid cooling inflation policies initiated by the Federal Reserve.
Mortgage rates have skyrocketed this year, beating expectations. The 30-year fixed average rose from 3.22% at the start of the year to 5.3% earlier this month, the fastest gain since 1994, according to Freddie Mac.
With inflation reaching 40-year highs, the Federal Reserve’s aggressive measures to contain it put upward pressure on mortgage rates. Earlier this month, the central bank raised its federal funds rate by half a percentage point, the biggest increase since 2000. The minutes of that Fed meeting, which were released this week , indicates that two more increases of half a percentage point each are expected at its meeting in June and July.
Fed officials saw rising inflation threats as they hiked rates in May
Investors, who had been selling bonds on worries about inflation and the Fed’s tightening monetary policy, have recently poured their money into Treasuries and mortgage-backed securities now that the stock market fainted. The 10-year Treasury yield, which hit a four-year high earlier this month when it hit 3.12%, fell to 2.75% on Wednesday, its lowest level since mid- april. Yields move inversely to prices. Since mortgage rates tend to follow the same trajectory as long-term bond yields, they too have fallen.
“A lot of turmoil in the stock markets lately,” said Ken H. Johnson, real estate economist at Florida Atlantic University. “It drives a lot of capital to the temporary safety and shelter of 10-year Treasury bills. As their prices rise, in response to the increase in temporary demand, yields drop slightly. The correlation between 10-year Treasury bills and mortgage rates is still strong.
Bankrate.com, which publishes a weekly index of mortgage rate trends, found experts surveyed divided on the direction of rates in the week ahead. Thirty-eight percent said they would increase, 38% said they would decrease, and 25% said they would stay about the same.
Michael Becker, branch manager at Sierra Pacific Mortgage, expects slightly lower rates in the near term.
“Mortgage rates have continued to rally over the past two weeks,” Becker said. “Today we have been looking at the best rates for about a month. Over the past few weeks, as equities continued to sell off, bonds benefited from the [flight-to-safety] offer. This is very different from the start of this year, when bonds and stocks were both sold off.
However, Dick Lepre, loan officer at Crosscountry Mortgage, predicts they will rise.
“No one has any idea where the economy is going,” Lepre said. “People are uncertain about inflation, GDP and even housing. During this year, and most of next, Treasury yields and mortgage rates will continue to rise. Inflation is the culprit.
Meanwhile, mortgage applications fell again last week. The composite market index – a measure of the total volume of loan applications – fell 1.2% from the previous week, according to data from the Mortgage Bankers Association.
The refinancing index was down 4% from the previous week and was 75% lower than a year ago. The purchases index remained stable, increasing by 0.2%. The refinancing share of mortgage activity represented 32.3% of applications.
“Refinance activity has fallen 66% since January 2022, when rates were nearly 2 percentage points lower than they are today,” wrote MBA President and CEO Bob Broeksmit. in an email. “Many potential buyers are feeling the effects of rapidly appreciating home prices, rising mortgage rates and too few listings in their price range, especially at the bottom of the market. There are signs that new and existing home inventories are beginning to rise, which should slow price growth and provide more options for homebuyers.